The Cost of Growing America

This Week In Ag #165

Three-quarters of the country is experiencing drought, with the Plains and southeast hit hardest. 70% of farmers admit they cannot afford to meet their fertilizer needs. Diesel fuel prices have doubled this spring. Even the industry’s bright spot presents a major challenge. How can you afford to start or increase a beef herd when prices for replacement heifers are going for $4 per pound?

Is it any wonder why farmer sentiment is dropping?

Just 15% of farmers responding to the Purdue Ag Economy study feel their farm operations are better now than a year ago. Future expectations fell 16 points since December and 28 points from a year ago. When asked if the country was headed in the right direction, positive attitudes fell from 65% to 57% in the past month. In December, 75% of farmers felt we were heading in the right direction.

Sure, we are seeing promising gains in market prices, but breakeven remains elusive for far too many growers. Two-thirds of growers feel that the Iran war will negatively impact farm income; one-third feel it will further negate income levels by over 10%.

This pain, however, does not appear to be universally felt. Much of Big Ag seems to be doing quite well. Based on Q1 reporting, net earnings for Nutrien improved 30% year over year. Profits for CF Industries have doubled. Yara increased EBITA by 40%. Things were more modest on the seed and chemical side, yet still in the black, as Corteva reported an earnings increase of 10% and Syngenta 5%.

More than ever, John F Kennedy famous words of over 60 years ago still ring true today. “The farmer is the only man in our economy who buys everything at retail, sells everything at wholesale, and pays the freight both ways.”