Fertilizer leading higher 2012 inputs
A lot of early outlooks for 2012 crop input costs are higher, with some as much as 16% higher than this year's crop.
So, how do these kinds of increases stack up for each specific input? Ohio State University Extension ag economist Barry Ward says current budget projections for his state show a likely 10% rise in variable costs for next year's crop. But, the figures that make up that estimate are all across the board.
"Higher commodity prices and higher costs lead us to a riskier production year as the cash investment in an acre of corn will top $400 (excluding land, machinery and labor costs) and in some production scenarios be closer to $450 per acre," Ward says. "The cash investment in an acre of soybeans or wheat will be in the $200-$250 range."
There's a ton of variability behind that 10% increase in variable costs. The good news is fuel costs will likely be about 5% lower than this year. But, big jumps in fertilizer prices, especially for nitrogen and potassium, will offset the cheaper fuel. Here's a specific rundown of Ward's input cost expectations:
Fuel: 4.7% lower than this year. "This is due to slightly lower oil consumption growth projections for 2012," Ward says. "The EIA projects natural gas prices to increase 4.3% in 2012. Expected tightness in the market is the reasoning, but this projection is harder to reconcile with the increased production capabilities in the U.S."
Fertilizer: "The different fertilizer products have seen significant price increases over the last year and likely will continue to increase due to higher crop commodity prices and positive profitability prospects for 2012," Ward says of the fertilizer marketplace moving into next year's crop. That includes:
Nitrogen: 24% higher for anhydrous ammonia, 32% higher for UAN, 40% higher for urea. Spring prepay anhydrous is "running $20-$25/ton more than spot delivered tons in many markets," Ward says.
Phosphorous: 38% higher for potash. "Potash prices will likely trend higher into 2012 as high crop prices will translate into continued strong demand while the two major potash consortiums will meter out supply to keep prices stable," Ward says.
Potassium: Potash is expected 38% higher than a year ago. "Potash prices will likely trend higher into 2012 as high crop prices will into continued strong demand while the two major potash consortiums will meter out supply to keep prices stable," Ward adds.
Seed/Crop Protection: 5%-10% higher. "Crop protection chemical prices will see similar increases except glyphoste, which should continue to see relatively flat prices due to excess global production capacity," according to Ward.
Despite higher costs, the good news is crop prices remain strong, and with the knowledge in hand already that inputs will be higher, farmers should be able to plan ahead and do what they can to prevent too much damage to their bottom line.
"Input costs have increased from last year but high futures prices for 2012 crops allow producers to plan for positive margins for next year," Ward says. "OSU Extension Enterprise Budget projections show positive returns for corn, soybeans and wheat in 2012."