As you gear up for planting, you’ll have ample reason to feel optimistic about the 2022 growing season as you head out into the field. Sure, inputs are up, in some cases way up, particularly for fertilizer and fuel. Unlike in years past, there will be no USDA-paid COVID-19 relief. Yet commodities are still going strong, which foretells a profitable growing season for farmers.
As you work out the details of your cash flow and inputs, use some of these insights to guide your decisions in the office.
Read: Is your farm profitable? Master these four metrics
We’re not soil scientists, but everything relies on that soil. As of April 18, the conditions have not been suitable for planting, according to the Minnesota Crop Progress and Condition Report. This certainly seems to set us up for a late start getting soybeans and corn into the ground, as in past years, producers are usually making headway in planting their potatoes, spring wheat and oats by this time.
But the silver lining here is in the topsoil moisture. Minnesota’s topsoil moisture supplies were rated as 68% adequate, 21% surplus, 9% short and 2% very short. These conditions are right on track with our seasonal weather patterns. Minnesota is coming off its 49th coldest winter in recorded history.
Though it’s cold, statewide drought conditions are largely in the rearview mirror, except for pockets of abnormally dry and moderate drought areas.
As inflation hits various areas of the economy, this is a season where producers are sharpening their pencils to manage the inputs.
One area that’s of particular concern is fertilizer prices. Many farmers will not be affected this growing season, as they’ve already locked in on their prices. If the higher prices hold, it will certainly be a bigger concern as we head into the 2023 growing season.
According to Progressive Farmer, nitrogen fertilizer is 14% higher at $1,031 a ton, an all-time high. Economists expect this will ripple into higher food prices.
Though prices have been on the rise since the fall of 2020, all fingers are pointed at Russia. As a major exporter of fertilizer, their invasion of Ukraine pretty much shuttered their markets. However, North American fertilizer producers can pick up the slack. They also have access to reasonably priced raw materials (natural gas). Also, the USDA has invested $250 million into a grant program for new fertilizer production. While there are resources to hand off fertilizer production, it remains to be seen if commodity prices and other influences would eventually bring down costs.
For a deep dive into the fertilizer markets and possible outcomes, check out the April 5 Farmdoc Daily report.
Though many producers may not feel the effects of high fertilizer costs this year, we’re already seeing farmers respond to these pressures. To manage the cost of these inputs, some producers are scaling back on corn because it consumes more nitrogen fertilizer. The number of acres devoted to corn is expected to decrease by 600,000 acres, according to the USDA's Prospective Plantings. Meanwhile, another 350,000 acres of soybeans will be in production this growing season.
Fertilizer costs could be influencing this pivot. Soybeans typically require a starter application of nitrogen fertilizer whereas corn often demands supplemental applications.
Not only is the fertilizer cost higher, but other inputs are rising.
For example, the rental price per acre is rising. The statewide average is $177 per acre under the USDA estimate for 2021, an increase from 2020, which was $173 per acre, according to Minnesota Extension Service data.
Read: Rent or buy farmland: Which is best for your operation?
Analysts are finding higher costs in fuel as well as seed, according to budgets created for Southern Minnesota commodity crops by the Minnesota State and Southwestern Minnesota Farm Business Management Association.
Despite higher prices, commodities are up. This means the forecast from the Minnesota State and Southwestern Minnesota Farm Business Management Association points to a profitable 2022 growing season.
Weather aside, the focuses for the 2022 planting season are managing inputs and savvy marketing. That’s where you can rely on the expertise of your ag banker at Minnwest Bank. We’re here to share our perspectives to guide your biggest decisions.
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