No relief in sight for high feed costs, feedlot owner warns

By JOHN O'CONNELL

Capital Press

The cost of feed rose more than any other production expense on the average U.S. farm during 2011, but labor wages held steady from the previous year, according to a USDA report released Aug. 2.

On average, U.S. livestock farmers increased spending on feed by $4,424 last season, up 21.4 percent from 2010. The second largest gain was a $2,035 average increase for purchasing livestock or poultry, up 18.3 percent. Fertilizer, lime and soil conditioners saw the third largest dollar increase at $1,975, up 20.6 percent.

All expenditures rose significantly in 2011, except for labor and interest, with total expenditures reaching $318.7 billion, up 10.2 percent from 2010. The average total expenditure for an individual farm in 2011 was $146,653.

Duwayne Skaar, owner of Skaar Feed Lots in Lewisville, Idaho, said high costs for feed and replacement livestock have persisted, with no relief in sight.

"About the only thing that's stayed the same is our labor costs," Skaar said.

Due to high feed prices, he said a lot of cattle are being sold for beef now, including dairy cows, driving beef prices down.

"The feed costs are tremendous. It's far worse (this year)," Skaar said. "With the feed costs the way they are, we don't know if there's going to be any margin or not."

University of Idaho Extension economist Paul Patterson said increases in agricultural expenses this year should be about half of 2011 levels. He noted a weighted average of physical production costs, interest, taxes and wages rose 12 percent last season but is up 5.7 percent so far this season.

However, an index of agricultural prices received by growers rose 26 percent last season and is up just 3 percent this year.

"This year I see a great degree of variability with some commodities doing extremely well and others doing poorly. The same holds true for producers. For some producers this is going to be the best year they've ever had, and for others this will be the worst year they've ever had, all within the same state," Patterson said.

Fertilizer prices have been volatile this season, starting with a decline and ramping back up due to a shortage in the supply pipeline caused by an early start to the 2012 planting season, Patterson said.

For a 2012 production cost study he's preparing for Idaho potato growers, Patterson will estimate a 13 percent increase in dry nitrogen costs and a 7.1 percent increase in liquid nitrogen costs from last season. He predicts dry phosphate will be up 5.3 percent, with a 20 percent gain for liquid, and potash will be up 12 percent.

Kim Wahlen, a potato grower in Aberdeen, Idaho, believes he's shielded himself somewhat from volatile fertilizer prices by joining other farmers in a large fertilizer buying group.

"We buy in pretty big volume, so our prices are good," Wahlen explained.

Patterson predicts Idaho diesel prices will be up 3 to 4 percent through this August. Through this July, he noted even national wages have seen an uptick of 3.6 percent from last year. In Idaho, Patterson forecasts wages will increase 4 to 7 percent this year, depending on the type of labor.

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