But economic inflation, which closed 2021 at levels not seen in about four decades, is raising the ante for farmers and others at the agriculture table.
“Most of the production costs are going to be higher,” says Bryon Parman, an economist at North Dakota State University, from farm inputs to equipment to labor. “There are inflated costs down the line.”
Bryon Parman, agricultural economist at North Dakota State University Extension. Courtesy of North Dakota State University
Farmers, and the cooperatives to which many of them belong, need to put much more emphasis on inputs such as fertilizers, herbicides and pesticides.
“Being positioned upstream of the need is essential to be a reliable supplier, but it puts us at risk,” says Jim Hlatky, Managing Director of Pro-Ag Farmers Co-op, which serves the Alexandria region. west-central Minnesota.
“And the reward,” he adds. “If you’re guessing right, it’s rewarding.”
Members of the co-op rely on managers like Hlatky for supplies to be ready for spring planting, but at a reasonable price.
Parman considers that rising prices for fertilizers and other inputs are a game-changer for cooperatives if fertilizer prices were to drop dramatically in the spring.
“If they stay with the bag, it could potentially bankrupt some of them,” Parman said.
Pro-Ag and other cooperatives face these risks. “Especially in a rising market, you don’t want to be long,” Hlatky said. “You don’t want to have more inventory than you can sell because when things go down they can go down $ 50 to $ 100 a tonne. “
Some farmers have increased their spring-to-fall fertilizer application in the face of rising fertilizer prices and concerns about spring supplies. Grand Vale Creative
Pro-Ag Farmers Co-op has approximately 1,200 members and sells approximately 25,000 tonnes of fertilizer per year. So a move of $ 10 in the market could mean $ 250,000. And if he moves $ 100, that’s $ 2.5 million.
“We are in a market that has grown by several hundred dollars,” Hlatky said.
This surge has prompted some farmers in the southern Red River Valley to apply fertilizer in the fall instead of the spring, says Brad Van Overbeke, general manager of the South Valley Farmer’s Union Co-op at Fairmount, North Dakota.
“A few guys who would have waited for spring but got on,” Van Overbeke said.
Pro-Ag Farmers Co-op stores fertilizer in this building at its Parkers Prairie, Minnesota facility, one of the co-op’s many locations in the Alexandria, Minnesota area. Lowell Anderson / Alexandria Echo Press
Farmers in more northerly areas who are late planting are at risk of running out of fertilizer, Parman said.
“It could be kind of ‘while supplies last’,” Parman said.
If there was a shortage, it would be “devastating” to corn yields, he said.
Hlatky said prices would not fall until after the 2022 harvest, but could drop after that when a lull could allow manufacturers to catch up.
“It would be very easy for a retailer to lose $ 100 a tonne on the remaining tonnes they have in inventory, maybe even $ 200,” he said.
“I think there will be a fertilizer price reset,” Hlatky said. “My gut says 2023.”
Learn more about the outlook for 2022: and What future for the agricultural economy in 2022?
Supplies of anhydrous ammonia and other fertilizers are uncertain as farmers plan the spring planting season in advance. Photo from the forum news service file.
There is no doubt that fertilizer supplies are limited and prices are high, but there is still a global demand. While there has been speculation that high fertilizer prices could drive corn acres down, corn remains king.
Van Overbeke said there are around 5% of the growers in his cooperative who could go all the beans. Most stick to their normal rotation and bite into the price of fertilizer.
Spring wheat is an option in North Dakota and the Hlatky region of Minnesota.
But Van Overbeke said wheat needs almost as much nitrogen as corn and soybeans need more spraying. With the prices of herbicides and pesticides also on the rise, “the math still goes to corn,” Van Overbeke said.
One of the advantages of planting corn over soybeans is that soybeans require less spraying. Grand Vale Creative
Hlatky agreed there was just a “slight shift to soybeans and wheat, not huge. Maybe a 5% move right now.”
The U.S. Department of Agriculture has set U.S. corn plantations for 2022 at 92 million acres (up from 93.3 million in 2021), with soybeans at 87.5 million acres (down from 87, 2 million) and wheat at 49 million acres. (against 46.7 million).
A 5% increase in wheat would therefore be consistent with these estimates.
Herbicide – pesticide
Having enough fertilizer storage space is essential to ensure that cooperative members can get the product they need when they need it. Lowell Anderson / Alexandria Echo Press
Some of the same factors that drive up the cost of chemical fertilizers – high natural gas prices, lack of exports from China, and other supply chain issues – also drive up the costs of herbicides and pesticides.
“It’s a very similar conversation to fertilizer… but the raw inputs that go into some of these other chemicals aren’t as hard to find as fertilizers are,” said Shelby Myers, economist for the American Farm Bureau Federation.
Cooperative managers say the two most popular herbicides, Liberty and Roundup, are both awarded by the manufacturers. And when these are scarce, it creates more demand for other options.
Another driving force behind inflated input costs is another postponement from 2021, what economists are calling the “Great Resignation”.
What is the Great Resignation?
Before the coronavirus pandemic, unemployment was already low. The COVID-19 epidemics instantly forced some people to quit their jobs and many of them have yet to return, creating an even greater demand for labor and pushing up wages and, as a result, l ‘inflation.
It is becoming such a monumental event that Parman compares it to the Great Depression.
“The Great Depression changed behaviors forever,” Parman said.
Some blame extended unemployment benefits offered after COVID-related layoffs. But Parman notes that these are for the most part completed and are not the main factor behind The Great Resignation.
Instead, he sees the early retirements of the huge baby boom generation, childcare issues and shifting priorities as the driving forces.
With distance schools, someone had to stay home with the kids or be prepared to do so on short notice.
“Families have spent a year or more doing this, and some of them have figured out how to make it work on one income,” Parman said. “Cut down on some things here and there.”
All of this means that rural areas and farmers who need help can continue to struggle.
“My main concern as a co-op manager is staffing and there’s this huge mismatch between what producers expect and what this new generation of employees will do,” said Hlatky, who grew up on a farm. dairy and fondly remembers her first co-op op offering two 15-minute breaks a day and Sundays off.
Now he says, “If you can’t leave early on Friday, you’re unhappy.”
Jim Hlatky, shown here in his Parkers Prairie, Minnesota, office on December 28, 2021, is the general manager of Pro-Ag Farmer’s Co-op. Lowell Anderson / Echo Press
He has already increased wages at all levels.
“It’s permanent inflation,” he says. “We need to increase our rates for the requests and all the services we provide. ”
He said he didn’t see the situation improving. “We kind of moved on to do more with less,” he said. “We are going to end up moving away from some services.”
Retirees have provided some of the seasonal help Van Overbeke and farmers in his area needed, but some are aging even outside of the part-time workforce.
“The retirees who used to work for me are getting so old that they can’t do it anymore,” he said.
The question is whether the most recent retirees are interested in filling their positions.
An advantage for rural America, notes Parman: “Rural areas will have access to more jobs through greater acceptance of remote work. ”
With inflation appearing to be a force to be reckoned with for some time, the Federal Reserve has indicated it will be more aggressive in 2022 to try to control it.
Inflation, Parman notes, can reverse a pay rise.
Raising interest rates is one way to fight inflation, as the Federal Reserve did under Paul Voelker in the 1980s. But this strategy can also trigger a recession.
Higher rates on farm loans and for the purchase of land or machinery could have an effect on farming businesses, he said, but with interest rates so low to begin with, he has says he thinks it will have less impact than inflated farmers’ prices. are chargeable compared to last year.
“These are really big jumps from a year ago,” Parman said.