American Farm Bureau Federation Chief Economist Bob Young says these are encouraging times for the U.S. farm economy. Young says higher prices for corn, cotton, wheat and soybeans are helping farmers but higher energy prices are impacting profit margins. Even in good times, he says high input costs affect the bottom line. AFBF Economist Matt Erickson says higher oil prices are reducing profits to the ag sector too, with high diesel prices hitting farmers hard at planting. Erickson says it also will impact the bottom line during harvest because combines and cotton pickers run on diesel. With projections of increased crude oil prices from the Energy Information Administration, he says farm diesel prices are expected to continue to increase.
USDA forecasts total operating costs in 2011 will rise by 18% for corn and wheat, 13% for soybeans, 15% for rice and 9% for cotton when compared to last year. Erickson says the current situation of tight supplies for grain -- fertilizer is a necessity as acreage production in the U.S. is at a maximum. He says each commodity is projected to experience higher yearly production costs from 2010 to 2011.