Economic Tidbits

Top Producer Concern—High Input Costs

The drought, crop inputs, and supply chain disruptions are top of mind concerns for farmers and ranchers according to a non-scientific poll conducted by Nebraska Farm Bureau at Husker Harvest Days. In the survey producers’ identified input prices (35 percent), drought (32 percent), supply chain disruptions (20 percent), and crop and livestock prices (11 percent) as the most pressing concerns heading into 2023. The concern with input costs is not surprising. Agriculture has not been immune from the inflation affecting the general economy. In some respects, inflation has been worse for agriculture.

Figure 1 shows national price indices for fertilizer, chemicals, diesel, and hay prices—inputs into crop and cattle production. The base period for comparison are the 2007-2010 averages, a relatively stable period for agriculture in terms of income. Values above 100 show prices are higher relative to the base period. Figure 1 illustrates the large cost increases producers have experienced. The fertilizer price index at one point this year was 94 percent higher compared to January 2021, nearly doubling. The diesel index was up 118 percent. Chemical prices have risen 55 percent. Hay prices (a proxy for feed costs) are also higher, increasing 28 percent. Several factors underlie the increases: strong demand, higher energy costs, production problems, supply disruptions, the war between Russia and the Ukraine, trade policy, and drought.

The cost increases are creating management challenges for farmers and ranchers. And given the many underlying factors contributing to the increases, it’s difficult to foresee costs coming down anytime soon. It could be late 2023 or 2024 before relief is seen. Because farmers and ranchers are price takers, they cannot pass the cost hikes along. Their fear is input costs remain high, but commodity and livestock prices fall creating a financial pinch.  

Figure 1. Farm and Ranch Input Cost Indices

Source: NEFB graphic based on USDA data

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