Expert: Crop Input Prices A Mixed Bag
Variable input costs are the costs of production that vary directly with the crop grown, but don’t include fixed costs, such as cash rent.
While some individual input prices are expected to increase, some will decrease and others will stay about the same. Fluctuations will serve to cancel out one another and to help keep overall variable costs fairly stable compared to last season.
Seed prices will make the biggest jump in the coming year, Alan Miller said. Corn seed is expected to increase by an average of 5-7%, and soybean seed prices are likely to increase more than corn.
“The drivers of higher seed prices in 2013 are higher commodity prices, tighter seed supplies due to the 2012 drought and prospects for strong crop returns in 2013,” he said. “Soybean seed prices are expected to increase more than seed corn prices because the cost of the commodity is a larger component of the seed price.”
Miller estimated seed costs per acre on average-yield farmland would increase by $8 for corn and $7 for soybeans.
Nitrogen fertilizer prices are climbing, too. Tight supplies and transportation problems could contribute to an increase of about 2-5% over last year’s already pricey nitrogen fertilizers, such as urea, liquid nitrogen (28%), or anhydrous ammonia.
But some nitrogen price relief could be on the horizon as the domestic fertilizer industry considers expanding production capacity to take advantage of abundant supplies of relatively cheap natural gas in the U.S., Miller said.
The price of another common fertilizer – potash – is down about 8% from last January because of abundant North American supplies. Those prices are expected to remain stable into planting season.
Phosphate fertilizer prices, while down almost 4% from last January, are expected to increase as spring planting season approaches.
“Ammonium phosphate products account for a large part of the phosphate fertilizer market in the U.S.,” Miller said. “Phosphate prices are expected to increase 1-3% into the spring of 2013 as suppliers rebuild inventories, and due to the influence of nitrogen in phosphate products.”
Propane prices are forecast at $1.60 per gallon for the fall of 2013 – up 8-10% from the fall of 2012, but down significantly from the fall of 2011. Diesel fuel will be down a projected 2-3% from last year, according to the most recent U.S. Energy Information Administration forecast.
“The state of the global economy and higher domestic oil and gas production are factors driving the forecast for diesel fuel prices,” Miller said.
Crop insurance premiums also are expected to be down as much as 4-5% in 2013 and interest rates remain flat and relatively low in Purdue’s variable cost estimates for 2013.