There is no doubt about it in the minds of most ag economists and farmers, the cost of raising a crop in 2012 will be higher than in 2011. Whenever a farmer has a good year, the following year agricultural input costs go up almost without exception. Ag retailers are accustomed to hearing their customers ask, “How much more will I pay this year?”
The outlook was succinctly announced to a room full of growers earlier this month in Prairie County, Ark., by Scott Stiles, Extension economist for the University of Arkansas. “It will cost more to produce an acre of anything this year.”
Farmers are expecting to pay more in production, but most of them were still excited about the potential of a second year of high prices for commodity grains prior to the Jan. 12 Department of Agriculture reports that had a major dampening effect on grain futures.
Reuters news service interviewed several farmers at the American Farm Bureau Federation annual meeting last week, and farmer comments were fairly consistent. “Prices are going up and costs are going up, but costs are going to increase more,” said Victor Womack, a dairy farmer from near Baton Rouge, Louisiana. He said that costs were already increasing for fertilizer, electricity and diesel fuel, let alone other lesser inputs.
Some farmers interviewed already had a concern that high grain prices could not be sustained to what they were in 2011. “The USDA will release its first farm income estimates for 2012 in February. Its most recent estimate saw farm income up 19 percent in 2011 and anticipated a boost in 2012, but it said increasing farm production costs could slow income growth,” wrote Reuters reporter Emily Stephenson, who represented the news service at the AFBF annual meeting.
A random survey of 462 farmers and ranchers at the AFBF meeting resulted in 24 percent expecting their income to rise by as much as 5 percent in 2012 compared to 2011. As for cost predictions, 40 percent of the survey respondents said they expect costs to be between 5.1 percent and 10 percent higher, and an additional 19 percent expect costs going even higher for 2012 crop production.
“Most major agricultural commodity grains fell in 2011, with abundant global stocks holding wheat down 18 percent and a softening world economy hurting soy and sugar prices,” Stephenson wrote.
Corn prices were the brightest spot in 2011, but a majority of farmers surveyed at AFBF’s meeting suggested that corn and soybean prices will fall in 2012 but wheat and cotton might be unchanged.
Price uncertainty, which is the common situation when farmers are needing to make decisions about planting, still weren’t negative enough to keep farmers from trying to figure out how to plant more acres to commodity grains. Survey totals showed farmers plan to increase corn acres by 6 percent, soybean acres by 2.5 percent and wheat acres by 7.1 percent in 2012.