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Input costs: How to plan for high-cost year

DFP Staff equipment-field-work
High input costs and tight margins look to await producers in 2023.
How high will input costs go? And is there anything producers can do to without sacrificing yield potential?

Input costs. That is the topic on everyone’s mind as we head into 2023. How high will they go? And is there anything producers can do to offset high costs without sacrificing yield potential? 

“That’s the difficult thing about high input prices. There is no risk management on the input price side,” said Will Maples, Extension Ag Economist with Mississippi State University. “The main thing producers are going to have to do is have a pre-harvest marketing plan and be actively marketing to get the price they need.” 

In November, Maples’ department at MSU released their 2023 Crop Planning Budgets. The increases in total direct costs compared to MSU’s 2022 crop planning budgets are substantial — as much as 25% in cotton and soybeans, an almost 50% increase in costs associated with corn production. (At press time, University of Arkansas 2023 crop planning budgets were also available online.)

The main culprits are fertilizer, diesel fuel and herbicides. 

It is important to point out here that due to the timing of the release of these crop budgets, last fall MSU experts were not able to capture the full increase in fertilizer that we saw in 2022. Also, diesel fuel has been on the rise since spring. At the end of the day, Maples said he does not think costs will be that much higher over 2022 for most producers. 

But the budgets do give an indication of how much prices have jumped over the last two years. And they confirm that 2023 will be another tight year on the farm. 

“It’s going to cost a lot to produce a crop this year,” Maples said. “For the most part, commodity prices are still high enough that some money will be made, but producers need to be strategic in their planning and proactive in their crop marketing.” 

Ginger RowseyWill Maples

Will Maples, Extension Ag Agronomist with Mississippi State

While no year is the same, historically spring is the best time for crop marketing as prices tend to trend downward as harvest approaches. 

“Be aware of the seasonal shift. Take advantage of storage opportunities if you have them. This is not the year to sit on your hands and wait to market at harvest,” he said. 

Making planting decisions 

With tight margins predicted for 2023, hybrid or variety yield potential trump everything, according to Josh Rupard, technical agronomist with Bayer. Rupard recommends farmers do their homework this winter in matching top-yielding varieties to their location and soil type. 

“When we get into high input costs, we need to make sure we’re getting everything out of every acre. That starts with hybrid or variety selection. You have to make sure the right variety goes in the right location,” Rupard said. “If you have the wrong one, I don’t care what you do, you’ll never be able to maximize it.” 

“And if we don’t have the fuel under the crop, it’s going to be harder to maximize yield,” he added. “Soil testing is the best way to know the exact nutrient levels in the field and what is lacking for next year.” 

Rupard works with growers in Northeast Arkansas who, like the rest of the Midsouth, experienced crippling drought.   

Josh RupardJosh Rupard

Josh Rupard, technical agronomist, Dekalb/Asgrow

“I saw crops run out of nutrients this year earlier than I ever have. Either because producers cut back due to high costs, or spring weather prevented producers from making timely fertilizer applications, or they applied timely but never received a rain to activate,” he said. 

“From that we learned what varieties work well in a stressed environment. That’s another factor for growers to consider as they review trial data and make their seed selections,” he added.  

Planning ahead for input costs

Timeliness, either in planting or applying crop protectants is often a cost saver, Rupard reminded us. In 2023 planning in advance to source and receive inputs will be key. 

“The supply chain has been an issue the past several years, and we continue to see some uncertainty in transportation and supply chain logistics. So, anything you can pre-order, take delivery of and get in your shop, well, you know it’s there,” he said. 

“In the past, growers have been able to call their local salesman and know they can get something the next day. That’s just not the case anymore. Next day delivery is becoming more rare in all industries, not just agriculture. The earlier you can get it ordered, get it delivered, you know at least you’ve got that,” he added. 

“Looking ahead to 2023, we know we’ll have curveballs. That seems to be the norm these days. Having a Plan B, C and maybe D and being able to adapt to multiple directions helps ensure success.” 

TAGS: Finance
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