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Production costs soar across West
Statistics reveal how much more it costs to farm and ranch in Western U.S.
By SCOTT A. YATES Capital Press
For all the good news about the price of wheat, any farmer will tell you it’s the bottom line — after all the bills are paid — that counts. And farmers’ bills have gotten bigger the past few years.
A study released Aug. 2 by the National Agricultural Statistics Service reported the nation’s average farm expenditures were up 5.4 percent between 2005 and 2006. The year before, 2004 to 2005, the average increase was 5.2 percent.
But the national average is misleading. If you farm or ranch in the West, your expenditures were up 12 percent from 2005 to 2006. And if you calculate the rise in expenditures in the West since 2004, they’re up 26.5 percent.
NASS considers Washington and California as core states in the West. Nine other states fall in the region: Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Oregon, Utah and Wyoming.
Although taxes aren’t a farm input in the traditional sense, they do affect the bottom line. Nationally, taxes were up 13 percent from 2005 to 2006. Interest to service farm debt was up 10 percent. The cost of fuel rose 8 percent.
Interestingly, rising costs have different impacts on different
sized operations. For example, farms and ranches in an economic
class with sales between $500,000 and $999,999 saw the steepest
increase in diesel costs from 2005 to 2006:
Jay Penick, president and chief executive officer of Northwest Farm Credit Services, said commodity prices may be good now, but producers must be careful managing their businesses come late 2008 and 2009.
“The (commodity) prices we are getting right now are covering the increase (in expenditures). The issue that we believe has to be watched very closely is if these prices back off — which historically happens — and the cost of production doesn’t back off. Then we could be really challenged in agriculture,” he said.
He is looking for 2008 to be another good year, but expects 2009 could begin the mismatch in gross vs. net.
“The only way you would see a significant reduction in costs would be if there was relief in the oil industry, because it touches so many parts of agricultural production,” he said.
The current NASS report addresses the rise in farm costs only through Dec. 31, 2006, Penick expects a similar tale will be told when the calculations are made for 2007. He predicts expenses in the West will rise another 15 to 20 percent when final numbers are tallied.
Dennis Solbrack, co-owner of Arrow Machinery of Colfax, Wash., said the farmers he’s talking to run the gamut from ecstatic to cautiously optimistic about the current environment. Prices are great, sure, but input costs are on the minds of many. Right now, farmers are busy with harvest, but as soon as they’re finished they’ll do the calculations to see what kind of position they’re really in, he said.
Solbrack said he expects farmers will be soul-searching about what they can afford with wheat at more than $6 a bushel and other crops also generating a positive return. A problem for some is that while they have been buying used or patching together repairs on old equipment during the tough times, the price of new machinery has kept rising. “There is concern that during this holding pattern, when people have held on and tried to get by, that the price of machinery has gone up,” he said.
How much prices have risen have surprised a few who have come to Arrow to inquire.
They think they’re in the chips, Solbrack said, but not only has the cost of the new machines gone up, the value of used equipment has gone down.
Curtis Hennings, a wheat farmer from Ralston, said there’s no
doubt higher commodity prices are helping to offset current input
costs, but no one’s getting rich. He calls it “a time of healing.”
Page Updated: Thursday May 07, 2009 09:14 AM Pacific
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