With commodity prices of crops such as corn and soybeans reaching near record levels, local farmers should be delighted with their prospects as they enter spring planting season, but are they?
“On one hand, the price of the commodities that we produce including grains, soybeans, peanuts, cotton and corn have gone way up, much higher than any of us ever expected,” said Charlie Cromley, co-owner of Cromley Farms in Brooklet. “But, our input costs, the cost to plant those crops have skyrocketed, and that changes the picture entirely.”
The Cromleys, like other farmers here and around the country, are facing a doubling in the cost of diesel fuel over last year and in some cases a 300 percent increase in the price of fertilizer. Fuel and fertilizer costs are specifically referred to in the agricultural industry as input costs, and they are the underlying factor driving farmers’ decisions in determining which crops to plant.
“I don’t know if people realize this, but most fertilizer products are petroleum based,” said Wendell Brannen, co-owner of Statesboro-based Tillman and Deal Farm Supply, a supplier of seed to many local farmers. “Corn and cotton require the most nutrients, in essence the most fertilizer. With the tremendous increase in the cost of fertilizer, many farmers that turned to corn particularly last year, are turning away this year.”
Mike Anderson, president of Bulloch Fertilizer, is stunned at the increase in the cost of the ingredients that his company must purchase to make the fertilizer that is sold to local farmers.
“The ingredients that we use are demanded worldwide, particularly in India and China,” Anderson said. “Our costs are up anywhere from 38 to 110 percent. It is across the board.”
Anderson said American suppliers of raw ingredients that his company uses such as diammonium phosphate will sell their product to the highest bidder wherever they are located around the globe.
“Suppliers tell me that they have to answer to their shareholders, and I understand that,” he said. “In essence, we are bidding against developing countries for these ingredients, and it appears that they are willing to pay just about anything to get them. That means to secure those products, we have to pay much, much more, which has a tremendous impact on our farmers and further down the road on the cost of the food they produce. In farming, it is very uncertain times.”
Brannen said farmers are planning to plant more soybeans and peanuts, because they do not require nearly as much fertilizer or water for that matter.
“Unfortunately, there is a tremendous demand for soybean seed, but we are having a very difficult time finding enough seed to supply local demand,” Brannen said. “With the drought last year, a significant amount of the seed that was produced is not germinating at the required levels, so it cannot be sold. Therefore, we have a shortage.”
Joe McManus, the assistant director of the commodities marketing department of the Georgia Farm Bureau, agrees with Brannen.
“Farmers are going back to soybeans, even though the price of corn on the market is very high due to the ethanol demand, but the bottleneck is going to be the seed,” McManus said. “It’s just not out there. Price is not the problem. There literally is not enough seed.”
According to farmers, the tremendous increase in input costs leaves the farmer with great “exposure.”
“It costs so much more to plant now, that you have to make a very, very good crop to cover your planting and farming costs, much more so than ever before,” said Lee Cromley, brother of Charlie Cromley and co-owner of Cromley Farms. “You just have so much more in it. It doesn’t mean that you can’t make some money off of your crop, it just means you have to have a really, really strong crop to do it, and you have to put the necessary inputs in the ground to produce that strong crop. With the drought conditions that we have had the last several years, we don’t know what to expect.”
Even though farmers can protect themselves against crop losses in the case of a failed crop by buying crop insurance, many farmers feel that they may not be able to hedge entirely against losses of certain crops with their crop insurance.
Stevie Rushing is a vice president of the T. E. Rushing Peanut Company and a co-owner of R & R Insurance which sells crop insurance.
“The amount of crop insurance coverage has gone up, because the crop prices (commodity prices) have gone up,” Rushing said. “On most of our crops, I believe it will cover the costs the farmer incurred in planting, but we aren’t entirely sure about corn, because it has become so expensive to plant. Bottom line, costs have gone crazy.”
McManus deals with farmers around the state of Georgia every day as a marketer of the commodities that they produce. He said he hears the same thing day in and day out.
“Farmers are telling me that they don’t know what to do. Do I forward contract my crop right now? How much should I contract? What should I plant? All I can say is there is as much uncertainty among farmers and farming in general as I have ever seen. With input costs so high, farmers know they need a bumper crop. Let’s just hope they get it.”