Economic Tidbits

How High Will Input Costs Be?

A non-scientific survey of producers conducted by Nebraska Farm Bureau at Husker Harvest Days found rising input costs were the top concern, identified by 35 percent as their top concern. Crop production costs will be higher in 2023. Crop budget estimates by the Center for Agriculture Profitability (CAP) at UNL suggest costs to produce the state’s three major crops—corn, soybeans, and wheat—could rise by as much as 25 percent (Table 1).

Table 1. Estimated per Bushel Production Costs

Source: 2023 Crop Budgets, Dept. of Agricultural Economics, University of Nebraska-Lincoln

Rising fertilizer, chemical, and fuel prices are the primary drivers of the higher input costs. Figure 1 shows national price indices for these inputs. The base period for comparison are the 2007-2010 averages. Values above 100 indicate prices are higher relative to the base period. Figure 1 illustrates the hefty cost increases for inputs since January 2021 (the vertical line). As of November, the fertilizer price index was 83 percent higher, the diesel index was up 98 percent, and the chemical index had risen 77 percent. Interest costs and cash rents are pressing higher too.

Cattle producers have not been immune from the cost increases. Hay, alfalfa, and corn prices (proxies for feed costs) are all higher (Figure 2). Hay has increased 48 percent since January 2021, alfalfa prices are up 72 percent, and corn prices are 60 percent higher.

Figure 1. U.S. Crop Input Cost Indices (Through November 2022)

Source: USDA National Agricultural Statistics Service

Figure 2. Nebraska Feed Cost Indices (Through November 2022)

Source: USDA National Agricultural Statistics Service

Given the many underlying factors contributing to the higher input prices, don’t expect costs to come down anytime soon. It could be late 2023 or 2024 before relief is seen. The fear for 2023 is input costs remain high, but commodity and livestock prices drop, putting producers in a financial pickle.

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