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Corn+Soybean Digest

Livestock Producers To Be Hit Hard By Added Costs

Rising feed prices and depressed livestock product

prices will put livestock producers in a bind going into next year,

according to a Purdue University farm management expert.

Both grain and forage will be in short supply this year due to drought,

causing feed costs to go up significantly. Producers that use forage, such

as hay, in their feed, will run into trouble. These input price increases

and decreases will affect producers all across the U.S.

"Hay is going to be in short supply, and many of those places we might turn

to normally are worse off than we are," says Alan Miller, extension farm

business management specialist at Purdue.

He said feed grain prices are expected to be up around 30% compared

to the previous year, and soybean meal prices are expected to be up about 16%.

While input costs increase, the livestock market is likely headed in the

opposite direction. Feeder cattle prices are expected to go down 8-12%

and feeder hog prices down 15-20%. The typical livestock operation will suffer the most, with an expected 10-15% cost increase depending on the type of livestock operation, Miller said. A 5-7% cost increase is expected for the typical crop-livestock operation and an increase of 2-3% percent for the typical grain operation, he says.

Other inputs hiking farm operation costs are the expected increases in the

costs of nitrogen fertilizers, seeds and wages.

Miller says certain types of nitrogen fertilizers may increase as much as 6% due to higher than expected natural gas prices, expectations of increased corn production in 2003 and tighter supplies of nitrogen products, anhydrous, liquid nitrogen, ammonia nitrate and urea.

He says some seed varieties may increase up to 5% in cost. New

technology is the reason for "periodic increases" in particular seed product

prices, Miller says. The increases that were attributable to Roundup Ready

soybeans, however, may have past.

"Seed prices have marched upward pretty steadily in recent years," he says.

However, Miller says the overall impact of seed prices on a typical farm is

hard to assess because the technological changes introduced with new seed varieties may reduce other costs, such as chemicals.

Miller said wages are expected to increase 4-6% depending on the type of labor.

"If you're looking for skilled people, then you'll compete with plants in

the local area for those employees and will have to offer competitive wages

and competitive benefit packages," Miller says. "If you're looking for

primarily unskilled labor, then those wages don't tend to increase as

quickly and the impact will be less."

Miller also says other input costs that are likely to increase modestly are

cash rents in areas not drastically affected by the drought and farm fuel

costs. Interest rates and chemical prices, on the other hand, are expected

to hold steady or decline slightly.

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