By Brian Hefty
Years ago, our dad used to speak briefly at many of our Ag PhD Winter Workshops. He would talk about the grain markets, what was happening in the overall ag economy, and other things where, quite frankly, NO ONE CAN PREDICT THE EXACT RESULTS. Before he would talk, I would always preface his comments by saying, “This is the entertainment portion of our show.” In other words, don’t take what we’re saying as a precise prediction of the future, but this is our educated guess.
For 2014, here’s my educated guess: input costs will likely be up slightly. That’s the really quick summary, but here are some more details on several different categories.
SEED – The good news here is we will likely have a better U.S. supply of quality seed corn going into next year. I mean, how can it get much worse than the last 2 years, right? Seed companies have put in a ton of acres because their profits got ruined the last couple of seasons when they had to grow so many acres of winter production in South America. Plus, whenever they do that, farmer satisfaction goes down. No one wants to wait until May 1 to get their seed corn, and who knows what will actually show up on that boat or plane coming from a foreign country? All that being said, the biggest factor here is the current fall price for corn and soybeans on the CBOT. Since new crop has been less than old crop and chances are new crop prices could be less than each of the last 2 years, it is unlikely any seed company is going to significantly raise their seed prices. However, any new technology or new genetic family that is supposed to yield more will likely carry a price premium.
CROP PROTECTION – The glyphosate shortage is officially over, so don’t expect sky high Roundup prices going into next year. Something could certainly change, but my guess right now is prices will be down year over year. September will likely once again be your best time to buy. Then, I always look at products with heavy return percentages to gauge next year’s prices. Pre-emerge herbicides were returned at an almost record pace this spring due to constant rain, so I would expect many of these products to be flat to even slightly down in price. Planting-time insecticides were super tight, so their pricing will probably be up. Fungicide use will likely be up, since diseases are more commonly present in cool, wet weather. In other words, fungicide prices could be up just a little bit going into next year. Just like with seed, crop protection pricing is based on commodity prices to some degree. Unless something dramatic happens with commodity prices in the next 4 months, crop protection pricing overall will likely be flat to up slightly.
FERTILIZER – This category is the most dependent on commodity prices. Since 2007, every rise or fall with commodity prices has been mirrored by fertilizer prices, although there is usually a lag of several months. What I’m saying is if you can tell me what commodity prices are going to do, I can fairly accurately tell you what fertilizer prices will do. My personal guess is commodity prices will go up slightly from where they’re at now or remain about steady, so that’s my opinion on fertilizer prices, too. Here’s our number one piece of advice. If you want to sell crop ahead, buy fertilizer at the same time. If you want to wait to market your crops later, you should probably wait to price your fertilizer until later, too. If you get expensive fertilizer when markets are high but then sell your grain later when the markets bottom out, that’s not a good combination.
PROPANE – You might not look at this as an “input” cost, but it is still a cost, and here’s my opinion. Planting occurred much later than normal this year everywhere. Many farmers were already pushing it on maturity based on the last 3 years, which all had more heat units than normal. So far this year, we have far fewer heat units than normal. While anything could happen, the odds right now certainly favor a late harvest, wet corn, and a lot of propane used this fall. In our operation, we’re locking in our propane right now before the fall rush hits. I recommend at least talking to your supplier(s) to see what they think.
That’s my “entertainment” for you for today.