Whenever we run a story from the USDA proclaiming how much farmers' net income has increased, we always get complaints from growers — justifiably so — that it paints too rosey a picture of their financial situation. Hidden down further in the story, well below the headline screaming, “Farmers' Net Income Reaches New High,” are the stats that show the ever-increasing costs of producing crops.
And these rising costs, buried as they are beneath the news of newfound agricultural riches, are foremost in growers' minds this year.
The best way to describe the mood of most farmers these days is one of “restrained exuberance.” They truly want to feel good about the good fortune of rising commodity prices, but they can't allow themselves to be carried away in the moment.
Rarely have growers ever seen rising commodity prices across the board as they are seeing today. Corn prices were pushed higher early in the year by an increasing demand for ethanol feedstock, and farmers responded by increasing corn acreage. At the same time, production shortages in other crops led to price increases in the other commodities.
All of this would seemingly create a “perfect storm” for U.S. farmers looking to boost their profit margins, but not so fast.
While farm gross revenues are increasing rapidly, rising farm expenses are not far on their heels. Fertilizer, seed, crop insurance and land rent prices are among the leaders, with fertilizer prices up by more than 50 percent from 2007.
A North Dakota State University agricultural economist reports that with higher crop prices, seed prices for the next year also are skyrocketing, with seed for some crops more than tripling in price. In addition, the Federal Reserve Bank of Chicago reports that land prices have increased by more than 15 percent during the past year. Also, farm machinery prices have increased by more than 15 percent and the production of many new machines has been sold out.
And if that's not enough, the economist — Cole Gustafson — says farm risks also are increasing. “Rising costs will raise the entire cost structure of agriculture. In addition to reducing future profit margins, the competitiveness of U.S. agriculture also will deteriorate when exchange rates normalize. Unless costs decline, U.S. producers will not be competitive in foreign export markets,” he says.
Let's hope that in the days and months to come, the story of cost increases will be told as diligently as that of rising farm incomes.
And do you remember when we reported in this space several weeks ago that the governors of Alabama, Georgia and Florida had agreed to “play nice” and reach some sort of agreement in the more than 17-year water war between the states? The plan was for the governors to work out the details of the plan by Feb. 15.
Well you can forget about that.
While an extension of the deadline was agreed upon, most of those close to the talks say the only agreement among the governors is that the dispute will probably have to be resolved in the courts, which could take several more years.
Meanwhile, the state of Georgia has shown a bit of ingenuity and started to look elsewhere for water, such as its neighbor to the north, Tennessee. Georgia lawmakers have passed a resolution creating a commission to revisit what it says was a faulty 1818 survey of the state line. The legislators would like to move the border 1.1 miles north. Doing so would move into Georgia a section of the Tennessee River in Marion County at Nickajack Lake as well as portions of Chattanooga, East Ridge and the town of Lookout Mountain, Tenn.
Predictably, Tennessee has fired back, saying that “in the face of Georgia's heinous assault on the sovereignty of Tennessee, this general assembly must act expeditiously and with authority to protect the borders of our state for present and future generations.”
The Tennessee resolution calls Georgia's effort a “veiled attempt to commadeer the resources of the Tennessee River for the benefit of water-starved Atlanta, which is either unable or unwilling to control its reckless urban sprawl.”
This is a sentiment shared by many in Alabama and Florida, and by more than a few farmers in Georgia, who realistically don't think they'll benefit from any attempt by the state to garner more water resources.