Input prices steady to lower than 2019 but offset by more corn acres
As farmers plan for 2020, they're finding input costs steady to lower.
Farmers in the Corn Belt are looking forward to the 2020 planting season with optimism.
Coming off one of the most disastrous years most of them can ever remember, farmers are anxious to wipe the slate clean and start over. However, they have also been putting together crop plans this winter and have found input costs that are steady to lower.
Even amid the trade war and China tariffs on herbicide and fertilizer ingredients, many retailers are able to offer prices comparable to 2019. With fewer acres planted nationally last year, many retailers have inventory they are carrying over at attractive prices, but the world economic situation is also putting pressure on fuel and petroleum products. The one caveat is with more corn acres projected for this spring and fewer prevented planting acres that could offset some of those benefits.
Lee Lubbers farms several thousand acres with his brother near Gregory, S.D., and says they have been working with their agronomy providers over the winter and have been surprised with the price points they’ve been able to offer. He says that will greatly improve their bottom line in this low commodity price environment.
“On seed and chemical, all companies are getting into the bundling programs. Because the companies want market share, they want our business and we’re using that to our advantage and bundling a lot of inputs and consolidating it down and actually getting a lot better prices,” he says.
He says through that program that were able to get the high performing genetics and herbicides they wanted to get the best performance.
Fertilizer product prices have also come down relative to a year ago.
“We have good multiyear relationships with our key suppliers," Lubbers says. "We sourced our fertilizer, we contracted In July. We got a real good price on urea. We actually caught a dip in our phosphorus, best price in six years. It pulled back 25% so we pulled the trigger on it.”
Fuel prices are also lower than a year ago with spot crude oil dropping 16% from the end of 2019 and its also down 7% from a year ago. Ultra-light sulfur diesel is also trading 19% lower than this same time period in 2019.
Jonathan Aal, account manager with Pioneer, says most companies were also able to hold the line on seed prices despite some challenges growing seed supplies in 2019.
“What I’ve seen from an industry perspective on seed, I would say it’s relatively similar to last year on corn as well as the soybean pricing,” he says.
However, many farmers took advantage of early pricing programs and received favorable discounts.
“I mean some of our growers that have some cash to work with I think, they took advantage of our prepay. You know we have some very aggressive prepay in the fall and those kind of growers are able to take care of it," says Tony Lenz, with Stine Seeds.
The increase in overall planted acres in 2020 and in particular corn acreage, however, may offset those lower input prices. USDA forecasted in the recent Ag Outlook forum that farmers will plant 94 million acres of corn, which is up 5% from 2019, while they will seed 85 million acres of beans, which is also up nearly 9 million acres from the previous season. Corn is a higher priced crop to grow, with higher seed, herbicide and fertilizer requirements. So, Lenz says farmers with tight cash flow may still consider planting soybeans.
“If they want to cut back on some costs, soybeans we put less inputs into that crop and so it is something farmers can look at," he says.
While herbicide costs look steady to lower than 2019, farmers will face higher costs for weed control in acres that sat idle last year. South Dakota Soybean Association President Jeff Thompson farms near Colton and says he anticipates spending more money on herbicides this year because of the record 4 million plus acres that were idle in South Dakota in 2019.
“The chemical program is going to be a big one because we had so many prevent plant acres, you know, with a lot of nasty weed escapes where we could not get into control them. We’ve got a weed bank that we’re going to have to put some extra money and effort towards controlling that area,” he says.
Sara Bauder, South Dakota State University Extension field crops specialist, says they may have to use both pre- and post-emergent products to get a handle on weeds.
“So, when they are able to get in the field, and we hope they are able to get in at a reasonable time, pre-emergent herbicides are going to be very important when that time comes,” she says.
The other added cost will be associated with taking care of field ruts. Even with lower fuel prices, farmers will be making more trips across the field.
“You know you’re going to have to consider some light tillage passes. Typically, what’s recommended is multiple light tillage passes to try to get that soil back to a point where it’s farmable," Bauder says.