Farming

Southeast Minnesota farmers ‘cautiously optimistic’ about planting season amid high fertilizer, fuel costs – Post Bulletin

EYOTA – Last year, Southeastern Minnesota farmers could buy a semi-truck load of diesel fuel for about $15,000.

The same amount of fuel this year is costing one Eyota farmer $35,000.

Dana Allen-Tully is the owner and manager of Gar-Lin Dairy Farms in Eyota, Minnesota, said diesel fuel prices nearly doubled what they were last year. She added that last year’s costs to plant 1 acre of crops were about $750 compared to over $1,000 this year with higher chemical and fertilizer prices adding to the increase.

“You have to have fuel to run equipment,” Allen-Tully said. “We’re seeing the same inflation that consumers are on all the goods that we buy.”

Pandemic-related inflation and the unexpected Russian invasion of Ukraine have driven commodity prices up, which according to the World Bank, are “particularly pronounced for commodities where Russia and Ukraine are large exporters, particularly energy, fertilizers, and some grain and metals.”

Specifically, Brent crude oil prices have risen 42% in the past year, making the US see a $2.088 increase in diesel prices and in the Midwest, the Energy Information Administration reported.

World Bank reported prices are expected to peak in 2022, but they will remain higher than previously forecast with market outlook largely dependent on the duration of the war in Ukraine.

Eric Ruen, financial officer for Compeer Financial’s Rochester office, said he has seen the financial issues in the agriculture banking sector.

With higher input prices for fertilizer and fuel, Ruen said farmers generally might look to forward-price their goods in order to secure a profit margin from higher operational costs.

“It’s often on the minds of farmers as they look to lock in those prices,” Ruen said. “(If) they’re going to commit to higher fertilizer prices, they’re generally forward pricing some grain as well, to mitigate risk and lock in a profit margin.”

Ruen’s recommendation for growers as they navigated high input prices was to keep open lines of communication with their suppliers and stay up to date on the latest prices.

One strategy has been to switch to crops that require less fertilizer, such as soybeans.

According to a report from the US Department of Agriculture, Minnesota planters are growing 600,000 fewer acres of corn and 350,000 more acres of soybeans.

Input prices are just one of many factors that go into a grower’s decision to plant, according to Ruen, it’s difficult to discern a direct correlation between high input costs and the acres a grower chooses to plant.

While the high fertilizer and fuel costs could have made this a bad year for farmers, Allen-Tully said on the flip side crop prices have been high as well and she is feeling “cautiously optimistic” about the planting season this year.

“There may be an increased opportunity for them [farmers] to have higher revenues,” Allen-Tully said. “I will say that it costs a lot more to put the crops this year than what it did, so we kind of eat up that margin.”

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