Farmers urged to think hard before rushing out to buy new equipment
Geoffrey and Jenny Burgess grow wheat, corn, soybeans and milo on their farm in Sterling, Kansas. Geoffrey also repairs older farm equipment.
Although he is excited about the higher commodity prices, much of his net gain is negated by the increase in chemicals, herbicides and equipment.
As for his repair business, it is going well.
"We have had some delays (in getting parts)," he said.
Because Burgess works on older equipment, he is not dealing with the increased delays of electronics or microchips, which are causing more pronounced holdups for newer farm equipment.
Corn, soy and wheat prices up
Post pandemic is a mixed review for farmers in Kansas. With wheat and corn prices hovering around $6 a bushel and soybean hedging higher than $14 a bushel, many farmers are feeling more confident — at least the ones who waited to sell their goods at a higher rate.
In 2020, the average price was slightly more than $9 a bushel for soybeans — the last time it spiked above $14 was in 2012. The price for corn and wheat were also lower in 2020.
Although Burgess is excited about both his crop conditions and higher commodity prices, expenses, he said, have increased dramatically.
"As far as wood goes, it's incredibly expensive," he said. "Chemicals are more expensive. Seeds are more expensive, and fertilizer is a long way up."
In addition to the cost of gas, mending fences or repairing a barn costs more today than one year ago, as the price of fuel and wood have escalated as well.
According to Duane Hund, director emeritus of the Farm Analyst Program in Kansas State University's Department of Agricultural Economics, what the Burgess' are feeling is true of most Kansas farmers.
"Anhydrous ammonia — liquid nitrogen — has doubled in price since this time last year," Hund said. "It never fails; when the farmer makes the money, his production inputs are going to go up to claim some of that back."
Farmers receive aid from COVID-19 relief funds
In addition to the price the farmer gets for his or her crops, this year, many farmers received extra aid in the form of COVID-19 relief funds. This much-needed aid, Hund said, is helpful, but he is afraid farmers might be spending too much money right now, thinking commodity prices will remain high for the next several years.
"It's causing some irrational exuberance," he said. "We may be getting ahead of ourselves in the agricultural market."
Hund said because of the government aid, many Kansas farmers are in decent shape - financially — right now. This false sense of prosperity, he believes, has caused farmers to buy according to their wants as opposed to their needs. He believes some of these farmers are going out and buying new or used equipment, and they might be putting the cart before the horse.
"Farmers are doing a great job lowering input and taking advantage of technology," he said. "But that technology is not cheap."
Farm equipment in high demand
During the past few months, Shawn Harmon, the general manager at BTI in Greensburg, has watched his supply of new and used farm equipment lessen. Harmon said a lot of farmers did not buy equipment last year, so some are purchasing new tractors and combines this year.
"They're buying used more now because of the lack of availability of new," he said.
According to Harmon, a lot of the problem with getting new tractors and combines is because of COVID-19. Some of the factories were working at limited capacity last year, he said, and some still do not have enough workers. As for parts, he said, they are available — they just take longer to obtain.
"We're all trying to work together and not keep too much on hand," he said.
Harmon's dealership and other dealerships are calling each other for parts.
"We're working together with other dealerships to keep the farmer going," he said.
But, according to Hund, some of this buying should not be happening.
"I am concerned about the amount of machinery that is being purchased," he said. "It's almost like the used car market. That's (the increased spending) an indication that farmers have some cash on hand."
Farm market trends
"We've got grain prices above the cost of production for the first time in years," said Jeffrey McReynolds, of McReynolds Marketing and Investments, a full-service commodity brokerage firm in Hays. "We've drawn down some of our surpluses and producers are able to make a little money now."
But, McReynolds warns, the price of steel and computer chips are high. As is the cost of chemicals, herbicides and fertilizer.
"There's shortages for practically everything," he said.
Reynolds said U.S. exports have slowed down, but he does see it picking up.
"It's possible Chinese demand might not be as good in the coming year as it has been," McReynolds said. "But we're going to sell a lot of grain (in the future), and that’s going to help."
Some cause for alarm with exports and labor
Although there are glitches in the export market, many Kansas farmers are still able to sell their commodities — albeit, sometimes, in a different way.
"The trains continue to leave Kansas (on a) timely (basis)," said Jesse McCurry, executive director of Kansas Grain Sorghum. "All the Kansas sorghum is about gone now, but sales and shipments will pick back up as soon as harvest starts in October."
But currently, he said, containers are hard to come by.
"No sorghum is moving by containers," he said. "Which is not normal."
Much of this lack of containers is due to export and import demand and the slowdown coming in and out of U.S. ports.
Some businesses, like Kauffmann Seeds in Hutchinson, are having difficulty hiring employees.
Many are blaming the increase in unemployment pay on the lack of employees looking for agricultural jobs.
Dustin Miller, a co-owner of Kauffmann Seeds, said he can't afford to pay construction wages.
Could the farming outlook return to normal?
Hund expects commodity prices to decrease in the not too distant future. He wants farmers to remain prudent with their purchases.
"We need to be a little bit more calm in our purchases," He said. "Let’s not spend money that is not in the bank yet."