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Input price declines can’t make up for low crop prices

To remain profitable when commodity prices are low, producers need to look for opportunities to trim costs, even in small increments, a University of Idaho agricultural economist said.
Sean Ellis

Capital Press

Published on December 20, 2017 10:12AM

Last changed on December 20, 2017 1:26PM

Corn is harvested in an East Oregon field Sept. 28. While farm input costs have decreased in recent years, they haven’t fallen enough to keep pace with declining crop prices and producers need to look for as many ways as possible to trim costs, even in small increments, said a University of Idaho agricultural economist.

Sean Ellis/Capital Press

Corn is harvested in an East Oregon field Sept. 28. While farm input costs have decreased in recent years, they haven’t fallen enough to keep pace with declining crop prices and producers need to look for as many ways as possible to trim costs, even in small increments, said a University of Idaho agricultural economist.

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CALDWELL, Idaho — As farm commodity prices have declined over the past three years, many farm input costs have fallen as well — but at a slower rate.

Farmers’ profit margins are getting tighter, University of Idaho Agricultural Economist Ben Eborn said during UI’s recent ag outlook forums. To survive, farmers need to look for every opportunity to increase efficiencies, even if it’s in small increments.

“It’s going to take small, 1-2 percent improvements to lots of things, like fertilizing, irrigating, labor and feed,” he said. “Every category has to improve a little bit in order to stay profitable. You’re not going to be able to find one silver bullet to keep you in the black.”

Farmers, he said, must be diligent.

“The best thing you can do is monitor your costs and financial records like a hawk,” Eborn said.

Eborn estimates that in 2018 fertilizer costs will remain steady with 2017, chemicals and pesticides will be steady to 1-2 percent lower, custom farming will remain steady to 1-3 percent higher and irrigation costs will increase 2-5 percent.

He said the best time to purchase fuel is late December into January and producers should shop around to make sure they’re getting the best possible deal on fertilizer and chemicals.

He also said producers should consider leasing equipment right now. “They can save a lot of money doing that.”

According to USDA data, average U.S. farm production expenditures declined from about $190,000 per farm in 2014 to about $165,000 in 2016.

But those declining costs haven’t been enough to offset declining crop prices for most farmers, Eborn said.

Costs “have gone down a little but they haven’t gone down as much as we’d like,” said Shelley farmer Stan Searle.

Searle said fertilizer prices were down in 2017 but he purchased more fertilizer to try to increase his yields to make up for lower crop prices.

His advise to fellow farmers is to focus on hitting the market highs.

“The marketing of your crops is probably going to be the biggest profit margin maker for you,” he said. “Hit the market highs while they’re there (because) they won’t be there for long.”

Parma farmer Mike Goodson said fertilizer prices “have come down quite a bit but not as fast as commodity prices are falling” and “labor is up quite a bit. Margins are pretty slim if not just break-even right now.”

To manage, Goodson is looking to reduce the cost of some inputs that are providing only marginal yield gains.

“We’re trying to get more efficient and cut labor costs,” he said.

Caldwell livestock and crop producer Matt Dorsey said that while fertilizer and fuel prices have declined a little bit, his labor costs have increased about 20 percent and seed and land rent prices haven’t decreased.

During a time like this when margins are super thin, “You can’t hardly do anything right,” he said.

His advice: “Turn over every rock.”



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