The costs of corn, soybeans and wheat jumped considerably final week. Corn futures in Might rose 60 cents and soybean futures in Might rebounded 90 cents in simply 4 days earlier than a minor selloff on Friday.
However on the associated fee aspect, it is dearer to develop this yr. Enter prices are on the rise in quite a few areas. Michael Langemeier, affiliate director of the Purdue Middle for Business Agriculture, says the most important near-term enhance is in fertilizers.
“Nitrogen, phosphorus and potassium all elevated in value in comparison with final yr and in case you mix these 3 sorts of fertilizer and have a look at the breakeven level of corn, it elevated corn breakage. about 25 to 30 cents now in comparison with what it might have been. earlier than the worth goes up. In order that’s a reasonably substantial enhance within the short-term breakeven level. There may be additionally stress on gas prices and due to this fact we’re seeing will increase in gas prices and that additionally provides barely upward stress on the breakeven value.
So why have fertilizers turn out to be so costly?
“I am not saying it is the one trigger, however one factor that drives the fertilizers is gas prices,” he defined. “If gas prices go up, you are going to see a rise in fertilizers, particularly nitrogen. We see a very good chunk of corn acreage, so there’s actually a reasonably good demand for the fertilizer.
This variation in enter costs is a deviation from latest historical past in keeping with the USDA.
“For about 5 consecutive years, in case you have a look at the index of costs paid for all gadgets of manufacturing as recorded by USDA NASS, there was no enhance. In 21, we’re beginning to see this variation. “
Shopper costs which might be rising sharply this yr, akin to lumber and gas, are additionally affecting farmers. However Langemeier says the optimistic motion in commodity costs has legs, so it actually focuses on land values and money rents.
“The money rents are a few third of the manufacturing prices for corn and 40 p.c for soybeans and so clearly they’ve a big impact on the breakeven level of those 2 crops and I actually assume we will have some upward stress as a result of excessive money lease costs and this can have a big effect on negotiations for 2022 money lease which is able to happen from late summer season to fall. “
Langemeier can be a professor within the Division of Agricultural Economics at Purdue.