Bruce Jones, Agricultural Economist
Department of Agricultural and Applied Economics
UW-Madison College of Agricultural and Life Sciences
2013 Wisconsin farm operating cost outlook
3:06 – Total Time
0:19 – Increasing land rent costs
0:50 – Land ownership costs
1:19 – Fertilizer and fuel cost prospects
2:01 – Credit outlook
2:26 – Advice for producers in 2013
2:55 – Lead out
The current cost of farming. We’re visiting today with Bruce Jones, Department of Agricultural and Applied Economics, University of Wisconsin Extension in the College of Agricultural and Life Sciences, Madison, WI and I’m Sevie Kenyon.
Sevie Kenyon: Bruce, start with the biggest cost farmers face.
Bruce Jones: Well, the biggest cost they face is the rent that they pay for land. Those have been up considerably with commodity prices being strong the past few years and so we are looking at rather high rents [and] the likelihood that they could even rise some more. Rents for Wisconsin farmers were up about $16/acre in 2012; they went from about $99/acre average statewide to about $115. That’s about a 16% increase and we had similar increases in 2008 of about 18%.
Sevie Kenyon: Bruce, do you want to address these land costs in terms of ownership?
Bruce Jones: Wisconsin, we need land but we’re not a land-based agriculture, we’re a dairy-based agriculture. So our farmers are putting money into cows and facilities, some in land but there’s not near the pressures to own land in Wisconsin as there is in the cash grain states. As a result, that’s why our land prices haven’t escalated as much as our neighboring states. Secondly, that’s why our rents haven’t risen as high as theirs have.
Sevie Kenyon: What are some of the other cost points?
Bruce Jones: Fertilizer and fuel are the other two big-ticket items for farmers. Fertilizer’s spiked back in 2008 and then there was a little moderation in their prices and then in 2009, 2010, and 2011 they’ve been going up at a pretty steady rate. Is it going to continue? Probably, because demands are going to stay strong for fertilizers because we’re going to try to respond to the high price of corn by growing more corn and supplying the marketplace. Fuel prices, similar patterns to what we’ve seen in fertilizer. Recently, we’ve seen some relief in the way of fuel prices but, by and large, they’ve been pretty stable the last couple of years and they’re going to continue to stay at relatively high levels.
Sevie Kenyon: Bruce, what does the credit picture look like for the coming season?
Bruce Jones: By and large, credit conditions are good. The balance sheets of farmers should be very strong, which would give bankers the collateral they need. Then the really good news is the cost of credit continues to remain low; interest rates are down. As surprising as it may be, they’re actually lower this year than they were last year. That’s good news if you’re borrowing money.
Sevie Kenyon: Bruce, do you have some advice for producers going into the new season?
Bruce Jones: The advice would be just to keep your head about you. Go out and shop the market and try to do as best you can in terms of laying in a reasonable price for those inputs. This may be a good time to start thinking about locking in some commodity prices, corn and soybean prices, because they may be some of the better prices we see. The big question right now is what are the growing conditions going to be and are we going to be able to come out with something approximated to a normal crop?
Sevie Kenyon: We’ve been visiting with Bruce Jones, Department of Agriculture and Applied Economics, University of Wisconsin Extension in the College of Agricultural and Life Sciences, Madison, WI and I’m Sevie Kenyon.