Farmers battle high input costs

   Count Danny Wilkinson among farmers astonished by this bizarre period in which market prices for their commodities are going through the roof, and yet they’re scrambling to profit from it.
  An Adair County farmer who serves on KFB’s Board of Directors, Wilkinson has wheat, corn and soybeans – all of which have seen record prices in the past year – plus beef cattle and burley tobacco, the Kentucky staples which remain profitable. You’d think the ring of $13 soybeans, $11 wheat and $90 steers would have him doing cartwheels.  Instead, he’s worrying about keeping costs down and margins up.

KFB Director Danny Wilkinson says despite a strong market, “margins on livestock are as tight as they’ve ever been.”

   “Who would have thought we’d have a tough time with these prices?” he remarked in reference to a bonanza for row croppers.
   Problem is, the soaring energy costs that have city folks swearing at the gas pump also have landed a budget-busting haymaker on the farm. Farmers across the country have been hit with a stifling rise in the cost of all major inputs; most notably fuel, fertilize, seed and feed, but also including electricity, land prices and other types of chemicals.
   USDA reports that nitrogen fertilizer prices are up by more than 60 percent since 2006 with phosphorus up nearly 200 percent during that period. All fertilize costs have doubled over the past year, seed is up 25 percent, diesel fuel 50 percent and land rental costs are skyrocketing in tandem with everything else.
   Wilkinson, who owns 600 acres and rents another 150 in northern Adair County, about halfway between Campbellsville and Columbia, says land he formerly leased for crops is selling for $4,000 an acre. “It’s phenomenal, and I’m not sure why,” he said.
   What’s especially concerning farmers like Wilkinson is that unlike crop and livestock market cycles, input costs tend to ratchet-upward but don’t normally drop significantly once established.
   Wilkinson says his biggest challenge has been in keeping the cost down for renovating pastures damaged by last summer’s horrific drought. He’s also reduced corn acreage in response to high fertilize prices that have doubled the production cost per acre.
   “I’m primarily a livestock guy so forages are real important to me,” he said. “The drought left me with a weak stand – I’ve been faced with a dilemma of re-establishing pasture. Seed prices are high. Fertilize has skyrocketed, so I’ve used very little fertilize. I’ve done a lot of soil testing and made extensive use of manure. I’ve even used some poultry litter I got from a neighbor’s farm.
   “I sowed a lot of clover because it puts out its own nitrogen. I’ve enrolled in some government programs that provide cost-share for (forage) improvements.  It’s just been a real challenge to get these pastures back into good condition at a reasonable cost.”
   The high price of feed corn prompted a modified diet for his feeder calves, using various mixes that include lowercost inputs like rice hulls, cottonseed and corn glutin. As for hay, supplies have been tight in the wake of last year’s drought. In mid-May, Wilkinson had only eight rolls remaining.
   Another offshoot of the current economic climate is Wilkinson’s decision to phase out of the hog business. At one time he was raising around 400 feeder pigs. He’s now down to 80 head and says he’s destined to lose money on some of them.
   “I have 52 cents (a pound) in some of them, and we have a $30 market,” he explained. “When I hear reports that the big guys (large scale producers) are losing $30 a head, I know we’re in a really troubling time. What I think we’re going to see in our hog industry is that a lot of small and medium-sized producers will get out for awhile, until it rebounds.”
   Wilkinson has similar concerns about the cattle situation.
   “My fear in this particular area (of the state) is that a lot of people said last fall they should have sold hay and cows; I’m afraid that this year we’ll see beef cattle sold off in the fall and we’ll have a big reduction in numbers.”
   Wilkinson added that he intends to cull some cows, will reduce his corn acreage, sell soybeans at the phenomenal price and probably continue to sell clover hay if demand is great.
   Farmers throughout the region were hit hard by last year’s drought and then ample rainfall this spring delayed many plantings. As of mid-May Wilkinson had not been able to plant corn and was itching to cut hay because he was about to run out. On the positive side, his tobacco contract with Philip Morris International calls for a nine-cent-per-pound hike over last year. That came after he and some fellow growers avidly complained about rising production costs.
   “I took my budget to them and showed them the projected cost,” said Wilkinson. “We’re on tight margins there, too.”