How important will it be for producers to manage input costs in 2011
I think farmers have already been paying attention to input costs for the last several years – especially when we had low prices for cotton. Now that we have higher prices, I still think they’ll be aware of the situation. Instead of cutting corners here and there, they may actually go the extra mile to ensure optimum yield. We know that residual herbicide applications are now part of those input costs, but research has shown they have a great return on investment in yield and long-term resistance management.
A lot of farmers are aware of these high cotton prices, but they’re also seeing high prices on fertilizer and fuel. For example, potash and nitrogen prices are a concern, and, if they don’t watch all of their input costs, they’ll encounter problems. Farmers have to monitor those expenditures at all times. Of all the various inputs, I really think fuel will be the most important one that will have to be watched.
As far as cotton is concerned, we know that it’s pretty management intensive. There will always be a lot of insecticide applications put on the crop. Even though we probably have the best price ever for cotton, you can eat up your profits very quickly if you don’t manage the crop very well. Most people are operating on a margin that is 115 to 120 percent above expenses. It doesn’t take long for that to disappear. Actually, we don’t give farmers enough credit for being good businessmen. The ones who survived the 1980s and 1990s knew what they were doing. It wasn’t luck that got them to this point.
Des Moines, Iowa
From the manufacturing side, we realize how labor-intensive cotton production is. And one of the farmer’s biggest costs is labor. Our new round module picker certainly helps eliminate some of those costs that we’re talking about. The farmer has less labor and fewer pieces of equipment in the field, so he’s definitely reducing his input costs. I think managing these expenditures will be even more important in the future.
Lake Providence, La.
We try to lock in the cost of inputs ahead of time. For example, we can forward contract and buy fertilizer. We also do the same with our purchase of fuel and try to buy our seed early. On the things that we can control, we try to go ahead and fix that exposure. However, you never know. For instance, we don’t have the capacity to hold all of the fertilizer that we may need for the year or all of the fuel we need to make a crop. So, coupled with that, you can only forward contract so much of what you’re hoping to make, and you’re leaving part of your crop exposed because of input costs.
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