Any farmer can tell you that perception isn’t always reality, especially when it comes to financials.
Futures prices for grains, livestock and milk are relatively strong as we end the year, but inflation and input costs could make farmers less profitable in 2022.
Paul Anderson, chief credit officer with GreenStone Farm Credit Services, has two words to describe the mood for the new year.
“We are cautiously optimistic for the year going forward,” he says. “We know it’s going to be a solid year, not a spectacular year like 2021 was for commodity prices, government payments and such that added to the bottom line of our producers.”
One of the biggest areas of concern is inflation.
“It is going to be substantial for producers when it comes to the crop planting cycle for fertilizer prices and fuel prices,” he says. “The other key item is that even bracing yourself for higher costs is the physical possession of actual inputs this year, specifically in the fertilizer area, is our point of concern and focus. We are talking to producers about that and asking them, ‘How are you hedging your risk?’”
Anderson says he’s not optimistic there will be any inflationary relief until the second half of the year. However, he is anticipating land values to decrease slightly.
“Commodity prices and margins drive land values as well as replacement machinery and equipment costs,” he says. “As we look into this year being less profitable, that’ll take some of the pressure off the top. Our team is forecasting it will increase, but not at the rate it increased last year.”
He is encouraging farmers to keep clear and open lines of communication with their loan officers. For the full conversation with Anderson, check out the January 3, 2022 edition of the MAT Podcast in the player below.
