Costs Run Up Behind Prices

Rising input prices are on the heels of high crop prices. Producers waiting to book inputs should start buying.

Published on: Sep 28, 2010

Growers who got caught with high-priced fertilizer when input costs finally dropped last year now are holding out on buying for the 2011 crop.

That's not a good idea, CoBank economist Sarah Spivey said during the opening day of the 2010 Southern Region Agricultural Outlook Conference in Atlanta.

"Grain prices are up; fertilizer is following," Spivey said. "I don't think it's going to drop."

Her outlook for input prices points to high prices across the board. Here's the top three producers look at:

• Seed: "I don't see seed costs going down," Spivey said, particularly in the face of continued lawsuits over genetically-modified seed.
• Fertilizer: "Fertilizer is running up."
• Pesticides: "If we have EPA looking into everything, cost is going to go up."
Looking across the agriculture's economic landscape, Spivey said, primary influencing factors are interest rates, economics and government policy.

Expect interest rates to increase eventually – those nobody who spoke at the conference cared to wager on when. One thing is certain, Spivey said, "there is nowhere to go but up from here."

The economic picture is good for agriculture because a mature economy, which the United States is considered to have, can only grow by increasing production, Spivey said. Agriculture is the economic vehicle for that.

Government policy, however, also is working against agriculture. With the U.S. Department of Justice looking into anti-trust issues and the Environmental Protection Agency wading into the water wars and re-evaluating pesticides, agricultural companies are going to add the costs of defending themselves into the prices for their products.

"Producers are going to have higher costs," Spivey said. "That's what it boils down to."