20 MAY / JUNE 2022 Input Costs Increase for Farmers AG BANKING Brady Brewer, Ph.D. Assistant Professor, Agricultural Economics Purdue University brewer94@purdue.edu It’s no secret that farmers have seen rising input costs over the past several years. The Economic Research Service of the U.S. Department of Agriculture has estimated that farmers in the United States paid 9.4% more for total farm expenses in 2021 compared to what they paid the year before. Thus, even with increased commodity prices, farmers are still concerned with the profits they will receive for their crops in 2022. In this article, I will discuss these rising input costs and some of the implications on input prices. The caveat, however, is that these numbers are constantly changing. As of this writing, the latest USDA numbers were published on Feb. 4. In normal times, the data I use for this analysis would be considered timely, but given recent world events, these numbers have almost certainly changed due to increased fuel costs and logistical issues, as well as trade disruptions caused by political responses to the Russia/Ukraine conflict. Where possible, I will provide context to how the numbers may have changed, as almost all prices may be higher than what the USDA reported on Feb. 4. As of the latest report, the USDA expected farm expenses to increase 5.1% for the 2022 crop year compared to 2021. This number is now almost certainly higher and represents a fairly large increase that farmers will need to budget for. While some farmers have already bought or locked in prices for certain inputs such as seed or fertilizer, many inputs that are experiencing price increases remain for farmers to purchase. This increase in farm expenses is led by the categories of fertilizer and fuel. The USDA estimated that U.S. farmers will spend 12% more on fertilizer in 2022 compared to what they spent in 2021. This is on top of a 16.6% increase in 2021 compared to 2020. That compounds to a 30.6% increase from 2020 to 2022. Fuel costs are the other major culprit of increasing farm expenses. The two-year increase, 2020 to 2022, for fuel was estimated to be 35.3%. This number is likely to be the most impacted by recent world events. The U.S. Energy Information Administration listed the March 14 U.S. No. 2 Diesel Ultra Low Sulfur retail price at $5.25 per gallon, an increase of $1.30 per gallon from Feb. 7, when it was listed at $3.95 per gallon. This represents a 33% increase in just one month. Farmers who have not locked in fuel prices will most certainly see higher fuel expenses for the 2022 crop year. Other farm expenses of note that have seen increases from 2021 to 2022 include labor expenses, herbicides, pesticides, interest and land rent. Livestock farmers have also seen a substantial increase in feed for their animals, driven by higher commodity prices. Additionally, beyond input costs increasing, some farmers are experiencing challenges in even obtaining farm inputs. A recent survey from the Purdue University Center for Commercial Agricultural showed that 31% of farmers have had difficulty purchasing fertilizer from their suppliers. This article may seem dire if you are a farmer or
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