Farmers are currently facing challenges as they transition into preparing for the 2022 planting season. The price of farm inputs is rising, and it is happening quickly. Supply chain issues are part of the story behind this problem. Three out of every ten farmers in the country expect input prices to rise over 8%, and unfortunately more farmers are moving towards this belief. Some even believe that input prices could be raised by a higher percentage than 8%.
One major input concern is the price of fertilizer. High natural gas prices indicate a higher heating and electricity bill this winter. The high natural gas prices affect fertilizer companies because some companies are not willing to pay the costs needed to continue production like normal with the amount they have to pay for natural gas. In Europe, natural gas prices have increased by almost 6 times higher. When natural gas accounts for around 85% of the production cost of ammonia, you can see where the high natural gas prices have become an issue. Ammonia is a key ingredient in many fertilizers. Keith Good from the University of Illinois reported that nitrogen-based fertilizers have become more expensive due to high natural gas prices which have impacted the price of ammonia and urea prices in the United States. Ammonia and urea prices have roughly tripled from last year, according to Good. The USDA estimates that out of 90 million acres of corn, 3 million acres will switch to soybeans for next year due to nitrogen levels. With the increase in cost of nitrogen, corn and soybeans could be close to equally as profitable for next year. There is plenty of fertilizer available to anyone willing to pay the price, but when the prices are so high it leaves farmers to consider what they can afford to do for next year.
Another group of inputs affected is equipment and other parts. Prices are elevated for steel due to both the pandemic and tariffs. The pandemic also caused a lack of microchips for electronics, which is causing delays in new equipment and repair parts. The lack of other inputs used to create machinery is also contributing to that problem. Local agriculture companies have noticed the lack of both things for months now. No parts or equipment can be created without labor, and as you are probably aware, there is a labor shortage in agriculture. Labor is lacking on farms, in processing facilities, and for critical service providers. There are also federal food safety inspector shortages, causing a limit on the amount of products that can be sold and shipped.
If available imports are found, there are then issues with the transportation of them that are contributing to the input shortage. Trucking productivity needs to increase and could be impacted negatively by a possible requirement of the COVID vaccine. The trucking industry is in need of approximately 60,000 workers. Prices to use a trucking service have increased by over 20%. On the barge side of transportation, grain shipping prices and volumes have still not recovered from the damages of Hurricane Ida. Shipping containers are usually filled leaving the U.S. and are returned full of agricultural products, but instead there have been shipping delays, surcharges, and cancelled bookings. Surcharges and record high shipping costs have created limited accessibility to export containers. Exporting goods via trains has even seen an increase in price. The input shortages and shipping prices are taking a toll on our farmers.
In conclusion, the current issues happening with imports in the agriculture industry is concerning and something the public must be aware about. Our farmers face tough decisions to make going into the 2022 planting season, and will not be able to take any decision lightly. They will have to choose what products are most necessary and what goods will be best for them to be able to profit next year.