There was good news and bad news at the 6th Annual South Carolina Ag Outlook Conference. The good news: sale prices for commodities are trending up. Unfortunately, so are the costs associated with producing them.
Walt Morgan, crop insurance agent for Mishoe Insurance Agency in the Pee Dee area, said the conference was a way to gather outlooks on different commodity prices and cost increases for the upcoming year to help farmers mitigate risks.
“The prices being up will definitely help, so I’d say that’s the main positive,” he said, but also noted that the cost of things such as fuel and fertilizer was the primary negative.
Morgan said that because South Carolina is such a diverse state, it was essential to focus on the state’s growers but with an eye on gaining an overview of U.S. growers to find a “happy medium.”
“This is going to be a year that each farmer is going to be completely different,” he said, “so by having this information and being able to talk them and make sure they are staying (on top of) their own budgets is going to be key for the upcoming year.”
The conference was held in November at Clemson University’s Sandhill Research and Education Center in Columbia — the home base of the Clemson Extension Agribusiness Team. Members gave 2022 outlooks for major commodities to help identify opportunities and threats for the financial success of South Carolina producers.
Information is power
“We need to make sure our farmers are equipped with the best information possible to make sure they stay on the farm,” Clemson Extension director Tom Dobbins said. “We can talk about sustainability all we want, but sustainability to me is profitability. If they’re not making a profit, they’re not going to be on the farm very long.”
The conference’s kickoff speaker was Kansas State University professor Brian Briggeman, who shared his macroeconomic, interest rate and inflation outlook. He pointed to the economic shutdown that accompanied the COVID-19 pandemic, which led to a historic drop of 31.2% in the county’s real gross domestic product.
Briggeman said recovery from that drop was initially strong but has now become “uneven.” Labor force participation is low, but strong job growth points to a solid rebound in the 2022 labor market.
While the country’s total public debt levels have soared, interest payments have remained manageable.
Questions remain for 2022
Still, according to Briggeman, numerous questions remain for 2022, including how long inflation might persist.
“We had trillions of dollars of fiscal stimulus come into the economy in 2020 and even 2021, and that supported strong consumer spending,” he said. “But what lasting impact is that going to have on the economy? We cannot continue to have the government propping that up. We need to have jobs in place and people working — that is far more sustainable.”
Peanuts
Among various commodities, Clemson Agribusiness Program Team director Nathan Smith said South Carolina planted acreage for peanuts dropped to 69,000 acres in 2021 with an average yield forecast at 4,100 pounds per acre. It matched a record set in 2007.
While 2021 U.S. planted acreage decreased 5% to 1.58 million acres, yield is projected at 4,105 pounds per acre, the second largest ever if realized, Smith said.
Thus, the overall outlook shows the pace of demand increase continues, led by peanut butter. Carryover stocks are stable at roughly 1 million tons, shelled prices are likely to remain stable, and increased production in 2022 is likely because they can be grown without adding fertilizer, Smith said. The announcement of a new peanut shelling plant to be built in South Carolina will also help encourage more acres of peanuts.
Cotton
As for the cotton industry, 2021 South Carolina planted acreage was up 16% to 210,000 acres and cotton average yield is projected at 925 pounds per acre, up 15% from 2020.
“I think that global recovery as shown by the increase in GDP is going to continue to be slow, but we’re seeing it,” Smith said. “That includes an increase in the agricultural section, and global consumption of cotton is increasing and rebounding from the pandemic.”
Clemson Farm Business Consultant Scott Mickey then addressed the corn, soybean and wheat markets. 2021 should be a record soybean yield and, if the state meets its projected soybean usage, that should be favorable for soybean prices.
2021 had some of highest prices in soybeans the state had seen since 2012-13 at $14.60 per bushel, but current projections showed that price dropping for 2022 to $12.63.
For wheat, meanwhile, ending stocks in the U.S. have declined five years in a row, but due to expected increases in planted acreage, production and total supply and demand, 2022 should see a slight increase in ending stocks.
“The thing about wheat you have to remember is it’s grown in most of the world. What would you expect global stocks to do given these high wheat prices? My concern with wheat is if you’ve got it in the ground or plan to put it in the ground, you need to start thinking about marketing some of that. … It may offer a good opportunity depending on the cost of production,” Mickey said.
Cost of doing business
But again, the cost of doing business is something state’s farmers should monitor, especially fertilizer prices.
“That’s part of the things that we’re concerned about as we move forward,” Mickey said. “(The prices) in South Carolina are all significantly higher — fertilizer and fuel are more than double — what they were last year.”
The same is true of diesel fuel prices, which rose from $1.47 to $2.86 per gallon from last year to this year, and propane fuel — which jumped from $1.04 to $1.92.
Expenses such as crop protection and insurance are among the other rising costs in production to go along with those drastically increased fertilizer and fuel prices, Mickey said.
“These (numbers) do not paint a pretty picture, but that’s kind of what we’re faced with,” he said.
Taxes
Extension associate professor of Agribusiness Adam Kantrovich offered attendees a tax and trade update, touching on the Build Back Better Act — a reconciliation package that had still not passed at the time of the conference but has since passed the House. As of Dec. 16, President Joe Biden had acknowledged it may not be able to pass the Senate before year’s end, but negotiations were continuing.
Kantrovich said the most recent draft would not have as great a negative effect for farmers through estate and gift tax changes as was earlier feared due to earlier drafts. There are some changes to taxes for the treatment of income from some trusts, as well as changes to some retirement accounts with large balances and additional tax for very high-income earners.
Some fines and penalties would be increased significantly for violations that fall under the purview of the following agencies or acts: Occupational Safety and Health Administration, the Fair Labor Standards Act, and Migrant and Seasonal Agricultural Worker Protection Act.
In general, Kantrovich said that if the bill passes the Senate and is signed by the president as is written, some taxpayers may see their taxes increase. But due to the Tax Cuts and Jobs Act passed by the Trump administration, there would be a sharp increase beginning in 2026 if there is no legislation to prevent the sunset clauses in parts of TCJA.
Trade
On trade, not much has really changed since the Biden administration has taken office. But there has been some movement on the European trade front with some agreements to resolve some trade disputes between the European Union and the United States, Kantrovich said.
He urged farmers not to get too stressed about the tax uncertainty right now.
“Farms and farmers are resiliant and will appropriately respond to anything that is thrown our way,” Kantrovich said. “Once we know more about the details once the bill is passed and guidance is received by the IRS, it is important that farmers work with a team of tax and legal professionals to determine if changes need to be made to business structures, tax management strategies or any succession, transition and estate plans.”
Clemson University contributed this article.