Forget weather conditions such as drought or flooding, or even the failure of Congress to produce a new farm bill. Some ag experts say the number one concern in agriculture these days is inflation.
“The land rent has gone up tremendously in the past year,” said Abbott Myers, chairman of the board of the Land Bank of North Mississippi and a full-time farmer in Tunica County. “Chemical costs have gone up. Seed has gone up tremendously. It is hard to believe a pallet of seed can cost $20,000. I burn a transport load of diesel fuel a week in the summer time, and now that costs over $28,000. That gives you some idea. A tractor costs the same as a small house costs now, $140,000 to $150,000. A combine is over a quarter of a million dollars.”
Because of the interest rate reductions by the Federal Reserve, interest rates on loans are lower. But Myers said that is the only thing going lower. Every other input cost is growing.
“Fuel is driving the inflation we are seeing in the farm economy,” Myers said. “We are sending a billion dollars a day to the Arab countries. I don’t think our country can continue to do this for an extended period of time. It is also disturbing our financial markets in the future.”
Myers said right now there is enough money in the system for agriculture. But there are concerns about the weak dollar and declines in the stock market. Plus ag producers are using more capital this year because of the high input costs. That raises concerns about future credit availability.
“The expense of money and availability of credit is going to be critical in the future,” Myers said. “There is huge concern about the future. Most of us in farming remember the 1980s when things went up very high. Prices of everything jumped up and then the bottom fell out. We had financial problems. A lot of farmers I grew up with went out of business. The fear right now is the same thing happening that we had in the 1980s.”
Gary Gaines, CEO of the Land Bank of North Mississippi, Senatobia, agreed that while credit is available today — and at lower interest rates — there are concerns about the future.
“From a broad base and in the long run, we certainly need to see a significant movement and improvement in getting away from our dependency on oil,” Gaines said. “Other alternative fuel sources should be supported and implemented in the long run. Credit is available today, but as things change in the world economy, there could be a significant impact in the next year or so. We are hoping it won’t significantly change, but no one knows at this point.”
Increasing prices of land are making it difficult. There has been an average increase in land values of 8% to 10% per year for past five or six years. Gaines said the price of agricultural land is getting up so high it is difficult to justify buying additional land or even renting land because the rents are getting so high.
“That is a concern of ours in regards to what the future holds,” Gaines said. “How much further are land prices going up, and are we possibly looking at some point at a decrease in land prices? It is a concern. We continue to monitor those values consistently.”
Contact MBJ contributing writer Becky Gillette at firstname.lastname@example.org.