Six-dollar corn and $16 soybeans have our industry excited about the prospects of 2022. It wasn’t long ago markets worth half of that were on the horizon. While prices might be strong, what those bushels will buy isn’t what it was pre-pandemic.
Twenty-year-old trucks with 200,000 miles are selling for nearly $30,000. Grocery beef prices are up 16% and tractors are in minimal supplies on dealer lots.
Welcome to the 2022 inflation economy. The Consumer Price Index shows inflation at its highest mark in four decades, jumping 7.5% year over year. The last time inflation was this high was 1982, in the heart of the farm crisis.
Listen in as Curt Covington, senior director of institution credit at AgAmerica Lending, discusses the farm economy, land values and more on AgriTalk:
EXPENSES VERSUS INCOME
Everything seems to be costing more, and USDA’s Economic Research Service agrees. It says production expenses are likely to be their highest since 2015. ERS is forecasting costs to rise by more than $20 billion this year, up 5% from 2021 and the highest production costs farmers have ever faced. That follows a more than 9% increase in 2020.
All of this is weighing on expectations for net farm income (NFI). The latest projections show $113.7 billion in 2022, down 4.5% year over year. It would still be the second-highest NFI since 2013.
Farmers are expected to see less than a 3.5% return on assets. That’s about half of recent averages and much different than the 10%-to-16% returns of 2010 through 2012.
INVEST FOR GROWTH
Some surveys say Americans are spending nearly $300 more per month on living expenses. Wow.
As a result, maximizing resources, investing in precision and taking what the market gives are strategies for long-term success.
