Best farm economy comes with fuel, fertiliser risk

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Aug 27: a year later fetched $6.31. The lower price outlook may trim funds available for purchasing new farm equipment, threatening a two-year jump in sales for agricultural manufacturers, Young said. Moline, Illinois-based Deere, the largest US maker of farm equipment, said Aug 13 agricultural sales in the US and Canada will rise up to 25% this year. No. 2 supplier Agco Corp., based in Duluth, Georgia, said July 29 that second- quarter North American machinery sales increased 36%.

Deere said it will raise prices for large, wheeled tractors by as much as 7% and combines by as much as 10.5 % next year to cover rising materials costs. Spokesman Kenneth Golden declined to comment further. Diesel fuel is up 46% in the past year at $4.283 a gallon on Aug. 25, according to the American Automobile Association.

Ammonium used as fertiliser sold out at $750 a ton for the rest of this year is now being sold at $1,000 a ton next year, said John Lipinski, chief executive officer of CVR Energy Inc., an oil refiner and fertilizer company based in Sugar Land, Texas, during a conference call with investors Aug. 13.

Falling crop prices coupled with higher costs would create a situation similar to 1980, when expenses fell 1% while income fell 9.2%, Agriculture Secretary Ed Schafer said on Aug. 6. Adjusted for inflation, farm profits fell 46%, beginning a decade in which annual agricultural net income averaged less than half what it was in the previous 10 years, according to USDA data. “We don't want to get into a situation in which farmers are squeezed,'' Schafer said.

What may help this time around is that many farmers have less debt than they did three decades ago, the American Farm Bureau's Young said. Farmer debt-to-equity and debt-to-asset ratios are both at their lowest levels since statistics began being kept in 1960, although the data doesn't adequately reflect the finances of farmers who rent land, Young said.