Kate Huffman and her family considered planting corn on their newly purchased 183-acre farm this year, but they ultimately decided against it. The input costs, she said, would have been too high.
“We ended up going with soybeans because of what it would cost for anhydrous (ammonia),” a commonly used fertilizer, said Huffman, a sixth-generation farmer in Henry County, Illinois. “It was just too costly to make it worthwhile.”
Higher fertilizer prices are just one consequence of a slew of global supply chain breakdowns caused by the coronavirus pandemic, experts said. Despite an improving economy, bottlenecks at ports and labor shortages are expected to linger. It means farmers can expect to pay more for needed supplies, such as equipment and pesticides, University of Illinois researchers said.
The prices for fertilizers are at “record levels,” said U of I agricultural economist Gary Schnitkey. Prices for potash and diammonium phosphate — which are also fertilizers — have gone up, but “probably the most striking” is the increase for anhydrous ammonia, he said.
“Last month, anhydrous ammonia prices in Illinois were $1,343 (per ton),” Schnitkey said. “Last time we were close to this was back in September and October in 2008, and that was the financial crisis.”
Some farmers are not sold on supply chain issues being the main culprit for higher prices. On Dec. 8, farmers asked the U.S. Department of Justice to investigate whether price spikes are due to market manipulation by fertilizer companies, according to a letter sent by the advocacy group Family Farm Action Alliance.
Huffman said she tries to prepay for supplies as much as possible to cope with expected price increases and limited supplies.
“This year, we’re pushing a little bit harder than we normally would just because we’re very nervous about whether or not there’s going to be supply,” she said.
Overall, some signs point to farmers being in a decent position to weather the increased prices. Net farm income for 2021 is anticipated to be about $117 billion, the highest level since 2013 if realized, according to U.S. Department of Agriculture researchers.
In Illinois, the net farm income for grain farms was “above-average” in 2020 due to higher corn and soybean prices in the latter half of the year and federal pandemic payments, according to U of I’s farmdoc daily.
Central Illinois farmer Lucas Roney was able to secure a better price for the fertilizer he used this fall by prepaying for his supplies. Even so, he estimates it was still up 50% from what it cost the year before. He’s already applied it all to his fields.
“We actually put it on this fall just to make sure that we have that fertilizer for the crop that we’re going to grow next year,” Roney, a fourth-generation farmer, said.
Roney said higher corn and soybean prices have helped offset some of the expense of supplies like fertilizers. But he worries what next year might bring.
“If something happens with reduced demand for our crops, then the price of our commodities are gonna go down dramatically,” he said. “If the price of what we’re selling our crops for goes down and we’re still paying these high commodity or high input prices, then it’s going to be a struggle to make a profit.”
Supply bottlenecks and inflation
Overall, the U.S. economy shows signs of coming out of its COVID-19-induced doldrums, but supply bottlenecks and inflation are causing some heartburn, experts said.
In 2021, the U.S. gross domestic product rebounded to pre-pandemic trend levels, and the unemployment rate has decreased. But the workforce remains below where it was before COVID-19 disrupted the economy and likely won’t rebound soon, said University of Illinois agricultural economist Nick Paulson.
Meanwhile, bottlenecks have been caused at ports that have seen “probably more activity than they necessarily would have been prepared for,” he said.
The bottlenecks will probably be resolved before the labor issue, Paulson said.
In November, nonfarm payrolls increased by 210,000, following a growth of 546,000 during the previous month, the U.S. Department of Labor reported. The unemployment rate, however, dropped from 4.6% in October to 4.2% in November.
In addition to labor shortages and supply chain bottlenecks, Paulson said, inflation has increased. Although unemployment has decreased, the price increases outpace wage increases, he said.
“The big question is,” Paulson asked, “are these price increases transitory?”
Inflation is one of Huffman’s major concerns as she sees the increasing prices for needed chemicals.
“We look at what we’re being told in the world that this is all transitory inflation,” she said. “I’m just questioning how much of that is actually transitory.”
Hitting farmers’ wallets
Supply issues and price increases will continue to affect products such as pesticides, farm equipment and fertilizers into 2022, said Schnitkey, the U of I researcher.
One reason was Hurricane Ida forced the temporary closing of a Bayer plant in Luling, Louisiana, that produces glyphosate, according to AgWeb. The most-used pesticide in the country, glyphosate is the active ingredient in Roundup weedkiller.
COVID-19-related shutdowns in China also caused supply issues with glyphosate and glufosinate, another ingredient used to kill weeds.
“We’re going to expect large increases in price of both of those chemicals,” Schnitkey said. “You would also expect to see a large increase in all pesticides because, if the price of glyphosate (and) glufosinate go up, you would also be expecting their substitutes and complements to go up as well.”
Farm equipment prices, he said, have risen “rather dramatically, particularly in the last half of this year,” though there has been an increase in demand as well. Tractor sales, for example, went up by 11% in the first ten months of this year, he said.
Amanda Perez Pintado is a corps member with Report for America, a national service program that places journalists into local newsrooms.
Top image: Central Illinois farmers harvest corn on Sept. 25, 2015.
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