Although Montana farmers and ranchers are benefiting from good commodity prices, rising costs of fuel and fertilizer remain a concern, according to the Montana Farm Bureau Federation. The state’s largest agricultural organization says although hay is plentiful and crops are growing well the costs associated with fertilizing, harvesting and irrigating are hitting the farmers’ bottom line.
“Many Montana farmers and ranchers are haying right now, and whether they’re swathing, baling or bringing in bales from the field, they’re using fuel. Higher-priced fuel is definitely detrimental to a farmer’s profit margin,” notes Montana Farm Bureau Vice President Bruce Wright.
The Gallatin Valley farmer says the cost of fertilizer is up this year. “When we put our wheat crop in, we run our starter fertilizer through an air seeder, then top dress it with more fertilizer, so the increase in the cost of fertilizer really adds up,” Wright says. “Although diesel prices might be down slightly from earlier this summer, they’re still hovering around $3.80. We use a lot of diesel haying. Farmers who use diesel pumps for irrigating are definitely going to see a large increase in expenses.”
AFBF Economist Matt Erickson has outlined the impact of high energy prices on farmers in a new white paper “Cost-of-Production Report: the Rising Costs of Inputs.” High oil prices will drive up the cost of production of corn, soybeans, wheat, rice and cotton in 2011, according to Erickson. Higher fertilizer prices are also impacting net farm income. USDA is forecasting 2011 total operating costs to climb 18% for corn, 18% for wheat and 15% for rice compared to last year. Erickson says a major factor causing these higher production costs are higher energy prices and higher fertilizer prices.
“One reason fertilizer prices have increased is demand for fertilizer given the current tight supply for grain commodities, primarily corn,” Erickson explains. “In the current situation of tight supplies for grain, fertilizer is a necessity as acreage production in the U.S. is at a max. Similarly, high grain prices increase the demand for fertilizer in international markets.”
“With diesel a byproduct of crude oil, farm diesel prices are expected to continue to increase with projections of increased crude oil prices from the Energy Information Administration,” Erickson says.
“Keep in mind that farming is a very capital intensive business, and high input costs affect the bottom line, even in the good years,” concludes Wright.
AFBF’s new white paper on the cost of agricultural production can be found at: http://bit.ly/pNlp7R.
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