Published on 01/06/97

Cost of Farming Still Climbing, Economist Says

Georgia farmers would love to see their cost of doing business go down a little. They'd be happy even to see these costs stay the same for a year. But they shouldn't count on it.

"Overall, it looks like the cost of farming will go up 2-4 percent next year," said Bill Givan, an economist with the University of Georgia Extension Service.

In fact, Givan said the only bright news on farm input costs is that interest rates currently aren't predicted to rise. "The cost of money looks a little flat," he said.

Since most farmers borrow at least part of the cost of putting crops into their fields, the prospect of stable lending rates is good news.

The price of everything else, though, seems to be headed up.

"Fuel costs are well above levels of a year ago and will probably ease a little higher," Givan said. "The price of equipment will likely be up a little, too."

Fertilizer prices are likely to rise, too. How much, though, will depend on events far from Georgia. "It depends partially on how much corn is planted in the Midwest and how much nitrogen is needed," he said.

Some seed costs will probably ease upward, he said, but not all. "Soybean seed is expected to go up," Givan said, "but the outlook is for peanut, cotton and corn seed prices to be a little flat."

For a long time, he said, prices stayed relatively flat for chemicals, a big part of farmers' input costs.

"But four or five years ago they started rising about 3 percent per year," Givan said. "It looks like that trend will continue next year, too."

Actual chemical costs to farmers are hard to predict, though, he said, since the need to use chemicals can vary so much with fluctuating weather and insect populations.

Givan figures labor costs to rise slightly, too, but admitted there isn't much ground for forecasting.

"The way farmers pay their labor can vary so much," he said. "All we can do is look at what has happened in the past."

Most of those costs affect only row-crop production. For livestock and poultry farmers, the main input is the cost of feed. "And right now, feed costs appear to have leveled off," he said.

That's good news for the folks who raise livestock and chickens. It's not so good, of course, for the ones who grow the feed.

What do rising input costs mean to consumers?

Very little, Givan said. Since only 22 cents of the consumer's food dollar goes to the farmer, most changes in food prices aren't caused on the farm. Farmers don't control the price of their products, either. So they can't pass their higher costs to their customers.

"They have to make up the difference by becoming more efficient," Givan said. "They have to keep learning to get better yields and lower the cost per unit to keep making a profit on their crops."

Dan Rahn is a news editor with the University of Georgia College of Agricultural and Environmental Sciences.