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Farmers, hit by supply chain delays, expect higher input costs

According to the latest Ag Economy Barometer released Tuesday, supply-chain disruptions continue to “haunt the nation’s agricultural sector,” with four of every 10 large-scale farmers and ranchers reporting difficulties in buying inputs ranging from fertilizer to farm equipment parts, according to the Purdue University survey.

Some 57% of the largest U.S. farmers – the group surveyed for the monthly barometer – said they expect input prices to rise by at least 20% over the next 12 months, 10 times the usual annual increase. In the previous Purdue survey, 55% said they expected input prices to rise by at least 12% in the coming year.

“Supply chain issues continue to haunt the agricultural sector,” said economists James Mintert and Michael Langemeier, who oversee the barometer. “Forty-five percent of respondents said that tight farm machinery inventories impacted their machinery purchase plans and 39% of producers in this month’s survey said they’ve experienced difficulty in purchasing crop inputs for the 2022 crop season.”

Responses to a follow-up question about obstacles in buying inputs “were quite varied, indicating there are problems across the supply chain with farmers reporting difficulties in purchasing fertilizer (31%), herbicides (28%), farm machinery parts (24%), and insecticides (17%),” wrote Mintert and Langemeier.

Fertilizer prices skyrocketed during the fall and into the winter at the same time ports were congested, creating fears that supplies would not arrive on time. The USDA estimated that farm production expenses rose by 8.3% during 2021. Analysts commonly expect expenses to rise this year although farm income would decline due to a softening of commodity prices and expiration of pandemic relief programs.

The Purdue report did not suggest what portion of producers ordinarily experience difficulty in purchasing inputs from their supplies. Concern about shortages and prices has been high as the economy recovers from the pandemic recession of 2020.

Nearly half of the big farmers participating in the Ag Economy Barometer said their greatest concern this year was higher input costs.

Inflation has been an increasing concern among farmers since last fall. In September and October, only one in three producers expected inputs to rise in price by more than 12% in the next 12 months. Now, nearly two out of three expect increases above 10%.

Purdue conducted its survey of producers from December 8-14, overlapping the Labor Department report on December 10 that the U.S. inflation rate was 6.9%, the highest since June 1982.

The Ag Economy Barometer is based on a telephone survey of 400 operators with production worth at least $500,000 a year. USDA data say the largest 7.4% of U.S. farms top $500,000 in annual sales. It has a margin of error of plus or minus 5%.

The homepage for the Ag Economy Barometer is available here.

Produced with FERN, non-profit reporting on food, agriculture, and environmental health.
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