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Farm expenses stable, cash rent pressured – Audio

STATUS OF WISCONSIN AGRICULTURE ONLINE HERE:

Status of Wisconsin Agriculture

Bruce Jones, Agricultural Economist
Department of Agricultural and Applied Economics
UW-Madison College of Agricultural and Life Sciences
bljones1@wisc.edu
(608) 265-8508

2014 Wisconsin farm operating cost outlook

3:03 – Total Time

0:18 – Lower fertilizer costs, machinery up
1:37 – Interest rates remain low
2:24 – Cash rents a question looking ahead
2:52 – Lead out

Transcript

Sevie Kenyon: Bruce can you tell us a little bit about expenses in the year we just finished?

Bruce Jones: Well there’s some good news. Energy prices have gone down marginally in the last year, primarily because crude oil prices have gone down. On the side of fertilizers, and seed crop inputs they’ve gone down a bit too,  particularly fertilizer potash and phosphorus side, nitrogen falling down as well. It’s the result of two things. One a little bit of a tempering for a demand for those inputs because we’ve adjusted acreage. The other one being price war in the potash market internationally that a couple of big firms decided that they would want to split out from the rest of the firms; they’ve been leaders in cutting price. The result has been a falling phosphorus and potash prices, and so farmers are seeing some more affordable fertilizer prices then they saw a few years ago. The last thing is machinery continues to be very expensive. It’s been going up, labor wages have been going up as well. Somewhat surprisingly, custom rates, charge for the use of the machinery, they’ve been lagging behind even inflation. So my guess is people have gone out and bought some of the higher priced machinery, and need to find some ways to generate some cash flow to pay for it so they go out and cut some deals that are pretty favorable on the custom side.

Sevie Kenyon: What can you tell us about credit? 

Bruce Jones: That’s the one bright spot. Interest rates continue to decline. They’re very low compared to what we saw five or six year ago. This is according to the banker’s survey run by the Federal Reserve Bank of Chicago. Those interest rates are about as low as you would expect them to go. Even though the interest rates are low however, there’s not a big demand for credit. Farmer demands for credit have been declining, and farmer repayment activities have been up. So they’ve apparently been using the higher profits we’ve seen the past few years to retire debts and finance themselves so the good news is that they must be doing very well financially such that their increasing repayments and reducing their instances of debt.

Sevie Kenyon: Bruce, what do you see for the year 2014?

Bruce Jones: The big question mark is cash rents. One of the complaints is been that they’ve been rising in response to the higher returns for corn and soybeans and other crops. Corn prices have taken a bit of a downward movement as have soybean prices, and so the potential for earnings on farmland are not nearly as great as they were a couple years ago, and so cash rents, they might be stabilizing to dropping because the opportunities for returns and profits aren’t as great. 

Sevie Kenyon: We’ve been visiting with Bruce Jones, Department of Agricultural and Applied Economics, University of Wisconsin in the College of Agricultural and Life Sciences, now celebrating 125 years, and I am Sevie Kenyon.