The Input Supply Chain is Scary for U.S. Farmers, Here's Why it May Be Worse in Brazil
USFR- Purdue College Roadshow RT1
As farmers race to finish harvest, the 2022 crop scenario is turning scary. Input prices continue to climb with some farmers fearing they may not even be able to source enough glyphosate and glufosinate for next year.
Stone X Group says according to their data, the Midwest wholesale anhydrous ammonioa nitrogen prices have risen approximately $434 since Sept. 10. That marks a 65% increase in just over a month, or $72 a week.
Even with climbing costs, at today’s commodity prices, agricultural economists at Purdue University say weighing corn versus soybean acres for next year really is a tossup.
“Somewhat surprisingly, both corn and soybeans were profitable this year, but corn was actually more profitable than soybeans in 2021,” says Michael Langemeier, Purdue University ag economist and a co-author of the monthly Purdue CME Ag Economy Barometer. “Looking at 2022, it's about even. There really is no advantage towards corn or soybeans, despite the fact that nitrogen prices have increased substantially.”
Langemeier says farmers need to factor in all of their input costs, not just the role increased input costs will play.
“We have to remember for soybeans, cash rents are an extremely important expense for soybeans,” he added during the U.S. Farm Report College Roadshow last week. “It's up to 40% of the cost of production. Phosphorus and potassium prices are also up substantially. So right now, there really isn't an advantage towards corn or soybeans, at least in the eastern Corn Belt.”
As painful as prices are for U.S. farmers, South American producers are faced with a similar dilemma. However, Langemeir says the situation in South America may be more dire.
“I think it could be actually worse in Brazil than it is in the United States,” he says. “My understanding is Brazil imports most of their fertilizer needs – even more than we do.”
South America’s production is still a wild card for the overall production picture entering the 2022 growing season. Jim Mintert, a Purdue ag economist who also co-authors the Barometer, says while acreage is projected to be up in South America, that’s still unknown. And he says the production picture in the southern hemisphere always plays a vital role in demand.
“On the demand side, I think that's really the bigger issue is when do we see a recovery and demand for exports, particularly to China, that's going to be the driver on the soybean side,” says Mintert. “We're holding up pretty well on the corn side. But a tremendous amount of uncertainty in terms of what this rise in input prices is going to do to production next year. And I think the thing that people are probably most worried about is what's going on with nitrogen. In the short run, we can get by with some minimal applications of P and K, but not nitrogen, at least on corn. So, that's going to be the bigger issue here as we continue through the fall and into the winter.”
