March 21, 2022

US AFBF: Production costs outpacing commodity prices

 

The cost of growing crops could outpace revenue for many US farmers in 2022, making it more difficult to break even despite rising commodity prices and increased demand both domestically and globally, the American Farm Bureau Federation (AFBF) said.

 

The organisation is launching a series of Market Intel articles examining rising farm production expenses.

 

The first report concludes that US farm production costs are likely to increase 6% in 2022, which follows a 12% increase in 2021. This continues a trend stretching back several years. Since 2013, US farmers have seen almost all production expenses increase. For example, livestock and poultry expenses have gone up 46% and marketing, storage and transportation costs have increased 59%.

 

Farmers are seeing a number of production cost increases including:

 

- Rising fertiliser, seed and chemical prices, which now make up to 17.5% of on-farm expenditures;

 

- Rising fuel and energy prices, exacerbated by uncertainty due to the Russia-Ukraine conflict;

 

- Increased costs of labor, both on-farm and for agribusinesses serving farms.

 

"The rising prices for fuel, fertiliser and other supplies create an unwelcome counterforce to higher commodity prices," said AFBF president Zippy Duvall. "Higher prices for crops are getting a lot of attention right now and of course, help farmers balance the books, but when expenses are rising just as quickly or even outpacing revenue, the financial gains evaporate. Right now, there are serious concerns about whether farmers will be able to access the supplies they need to put a crop in the ground."

 

AFBF is working to ensure the US President Joe Biden administration and US Congress understand the severity and potential implications of increased production costs and the limited availability of some supplies.

 

Future Market Intel articles will explore the rising cost of production expenses like seed, pesticides, energy, machinery, land, labor, credit and water.

 

A Market Intel analysing fertilizer prices was published in December 2021.

 

- AFBF