Direct Input Cost Trending Up on 2023
Farmers are already in the process of planning for 2023. Including looking for seed discounts, monitoring fertilizer and chemical prices, crop insurance, and even securing labor. In the 2022 growing season, crop inputs jumped 25%. 2023 looks to continue similar trends, with an additional 15% hike in input costs. Obviously, these increases breakeven numbers and will make it more difficult to secure decent profit margins.
Another major obstacle the past couple of years, is the scarcity of new and used machinery. The pandemic destroyed supply chains and newer equipment is delayed. In addition, getting parts is problematic. Furthermore, the cost to repair your own equipment and rent or lease is on the rise. Equipment dealerships, mechanics, welders, etc. all are charging more for goods and services.
Now that we have established cost basis, we can discuss 2023 revenue projections. Corn and Milo have trended up through July 2022. In the last six months the market has dipped some losing $0.50 - $0.75 in value per bushels. As with most things involving commodities, we have no idea if that trend will continue. We have a war in Ukraine, the United States is experiencing drought in the western states, and global supplies are lower. However, if corn shifts lower and inputs increase, margins will be squeezed. In addition, if corn continues trending down, farmers may return net negative numbers in 2023.
In conclusion, direct input prices (chemical, fertilizer, etc.) continue to rise in 2023. Profit margins look to decrease due to inflationary movement. It will be critical to understand breakeven numbers and market grain successfully to overcome rising costs.