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Production Input Outlook

2024 River Valley Beef Conference, I-40 Livestock Auction, Ozark, AR

February 20, 2024

Ryan Loy, Ph.D.

Assistant Professor and Extension Agricultural Economist

Department of Agricultural Economics and Agribusiness

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Weather Update

October 4, 2023

February 13, 2024

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Mississippi River Update

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River Levels and Barge Freight Rate

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Inflation Adjusted:

Decrease by 1.3%

(2022 – 2023)

Increase by 1.6%

(2023 – 2024)

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FERTILIZER

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Domestic Natural Gas Price

Source: U.S. Energy Information Administration, 2024

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Weekly North America Fertilizer Price Index

All fertilizer prices reported to Bloomberg are down ~34% since February 2022

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Key Fertilizer Price Update

Nutrient	February 2022 Price ($/lb)	February 2023 Price ($/lb)	February 2024 Price ($/lb)	Price Change Over 2022
Urea (46-0-0)	$0.35	$0.21	$0.20	-$0.15
MAP (11-52-0)	$0.39	$0.33	$0.33	-$0.07
DAP (18-46-0)	$0.38	$0.35	$0.33	-$0.05
Potash (0-0-60)	$0.36	$0.23	$0.19	-$0.17

Source: Bloomberg Green Markets

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Livestock purchase:

Increased since 2022.
Low stocks?

Fertilizer:

Relatively unchanged from 2023 (small increase)

Feed Purchases:

Drought and commodity price.

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USDA Forecasts

Source: USDA-ERS, 2024

	Corn		Soybean		Wheat		Cotton		Rice
	2023	2024	2023	2024	2023	2024	2023	2024	2023	2024
Operating costs
Seed	$108.96	$109.70	$70.38	$70.86	$15.70	$15.81	$94.84	$95.49	$116.86	$117.66
Fertilizer	$186.73	$160.12	$52.86	$45.33	$78.60	$67.40	$112.02	$96.05	$201.20	$172.53
Chemicals	$60.88	$55.90	$52.88	$48.55	$23.09	$21.20	$102.99	$94.56	$144.28	$132.47
Custom Operations	$34.30	$35.07	$15.34	$15.68	$16.68	$17.05	$31.41	$32.11	$102.33	$104.63
Fuel, Lube, Electricity	$28.20	$29.73	$20.07	$21.16	$15.32	$16.16	$44.92	$47.36	$127.98	$134.93
Repairs	$46.67	$46.94	$35.86	$36.07	$31.34	$31.53	$55.17	$55.50	$72.78	$73.21
Other Variable Expenses	$0.27	$0.27	$0.02	$0.02	$0.95	$0.97	$88.84	$97.76	$15.51	$15.86
Interest on Operating Capital	$11.79	$10.29	$6.26	$5.59	$4.60	$4.00	$13.41	$12.19	$19.76	$17.66
Total ($/Acre)	$477.79	$448.02	$253.67	$243.26	$186.29	$174.12	$519.32	$498.48	$800.71	$768.94

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FUEL

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Crude Oil Spot Prices

Source: U.S. Energy Information Administration, 2024

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U.S. Retail Gasoline

Source: U.S. Energy Information Administration, 2023

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No. 2 U.S. Diesel Prices

Source: U.S. Energy Information Administration, 2023

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2024 Petroleum Forecasts

Global supply and demand are forecasted to be balanced.

Decrease in price ~ April ’24

Watch for OPEC decisions.

Fuel prices continue to fall.

	Q4 2023	2024 - F
Crude Oil ($/Barrel)	$84.46	$82.00
Gasoline Retail Price ($/Gal)	$3.60	$3.52
U.S. Crude Oil Production (Mil Barrels/Day)	12.78	13.16
No. 2 Diesel Retail Price ($/Gal)	$4.31	$4.07

Source: U.S. Energy Information Administration, 2023.

Reuters, 2023.

S&P Global Commodity Insights, 2023

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Trade and Key Shipping Routes

Panama Canal:

24 ships/day until April
Drought has rerouted shipping to the Suez Canal.
Watch for May rains

Missile and drone strikes forced shipping companies to halt using Suez Canal.

Baltic Dry Index

February 7: $1,502 (~Average)

Source: Center for Strategic and International Studies

Panama Canal has also been at historic lows. Slowing shipping traffic for the western hemisphere.
The response to rising costs and wait times at the Panama canal, ships have rerouted to use the suez canal instead.
1/3 of all shipping traffic flows through the Suez Canal.
Recall that the Suez Canal was where the grounded shipping container halted global trade (2021).
Suez Canal passages are at 63 percent compared to the previous year, while Cape of Good Hope passages are up 70 percent.
The increase in ship diversions increases fuel and labor costs while decreasing the average amount of cargo traffic reaching its destination.
The Baltic Dry Index, which tracks the cost of transporting various raw materials provides insight into the macroeconomic impact of shipping delays. While the index spiked to above $3,000 in early to mid-December, the cost of shipping has dropped to $1,503 as of January 22, which is an approximately normal level.
The Baltic Dry Index (BDI) is an index of average prices paid for the transport of dry bulk materials across more than 20 routes
Members contact dry bulk shippers worldwide to gather their prices and they then calculate an average.1 The Baltic Exchange issues the BDI daily.
Insurance premiums for shipping has skyrocketed since Nov 2023. (0.5% - 0.7% of the total value of the ship).
ships with low cargo value, and a higher tolerance for risk, have deemed the trip worth making.
36 ships a day is a regular amount for Panama. Water saving measures have allowed for reduced restrictions. If rains come in May, they will shoot for 36 but if not then back to reduction (proposed was 18 ships a day).
Red Sea diversions could extend into second half of 2024

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FARM ECONOMY

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Cash receipts expected to decline

Cattle decline $1.6 Billion (4%)

Main Driver: Government Payments

Will tight supplies reverse this course? (doubtful)

Fewer calves available in 2024
Offset by low cow slaughter?

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Farm Debt

Farm debt forecasted to increase by 4.9%

Source: USDA-ERS, 2023

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Labor Expenses

2024 forecast ~$47.4 billion.
Up $3.3 Billion from 2023.
4.4% growth rate:

Highest since 2016.

Use of hired and contract labor depends on state and commodity.

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Financial Risk

Decreasing NFI and historically high farm debt levels.

Lower direct government payments (relative to 2022 and 2023).
High production expenses and lower commodity prices.

Debt-Asset levels:

12.73% (2023) – 12.78% (2023F).
Lower is better!

Source: USDA-ERS, 2024

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Considerations for the Future

Fertilizer Supply and Delivery:

2024 water levels in the Mississippi River could hinder shipments (Mcfetridge, 2023).
Red Sea transportation issues

2023 H-2A Worker Protection (U.S. Department of Labor, 2023):

September 12, 2023: proposal to amend regulations on certification of temporary employment workers.
Farm Labor Stabilization and Protection Pilot Program (USDA, 2023)

2024 Forecasted Beef Import and Export Demand:

Could impact prices
Imports: 4.13 billion lbs (Record)
Exports: 2.8 billion (unchanged from 2023

the demand for H-2A workers has skyrocketed in recent years. DOL certified over 370,000 temporary H-2A jobs in FY 2022 – more than 7 times the number certified in 2005 and twice the number certified in 2016.

provisions related to protections for workers advocating on behalf of themselves and their coworkers, seat belt safety, and termination for cause, among other proposals

FLSP Program:

65 mil in grants available
address workforce needs in agriculture, promote a safe and healthy work environment for farmworkers, and aims to support expansion of lawful migration pathways for workers, including for workers from Northern Central America, through the Department of Labor’s seasonal H-2A visa program.
USDA identified that agricultural employers have experienced increased challenges finding an adequate supply of workers, which threatens our domestic capacity to produce a safe and robust food supply.
economic benefits for foreign workers and their families, and professional and economic development opportunities for communities that send their workers to participate in the H-2A program.
table and resilient food and agricultural sector relies on attracting and retaining skilled agricultural workers, and strong working conditions are critical to achieve that goal.

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Thank You!! Questions?

Dr. Ryan Loy

Email: rloy@uada.edu

Phone: (214) 642-9066

FarmEconAR.com

UADA-CES Enterprise Budgets

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References

Bloomberg Green Markets. (2023, September). Green Markets Report. Retrieved September 25, 2023, from https://fertilizerpricing.com/pricing-news/green-markets/.
CBC News. (2023, August 4). B.C. Port Dispute Ends as Workers Vote to Accept New Deal. Retrieved September 28, 2023, from https://www.cbc.ca/news/canada/british-columbia/port-workers-vote-result-august-4-1.6928803#:~:text=B.C.%20port%20dispute%20ends%20as,accept%20new%20deal%20%7C%20CBC%20News.
S&P Global. (2023, August 8). Global Crude Production Growth Seen in 2023, 2024, as US, others offset OPEC cuts: EIA. Retrieved September 28, 2023, from https://www.spglobal.com/commodityinsights/en/market-insights/latest-news/oil/080823-global-crude-production-growth-seen-in-2023-2024-as-us-others-offset-opec-cuts-eia.
US-EIA. (2023). Henry Hub Natural Gas Spot Price. Retrieved September 26, 2023, from https://www.eia.gov/dnav/ng/hist/rngwhhdM.htm.
US-EIA. (2023). Weekly No. 2 Diesel Retail Prices. Retrieved September 26, 2023, from https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=EMD_EPD2D_PTE_NUS_DPG&f=W.
US-EIA. (2023). Weekly Gasoline Retail Prices. Retrieved September 26, 2023, from https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=EMM_EPM0_PTE_R30_DPG&f=W.
US-EIA. (2023). Short-Term Energy Outlook. Retrieved September 26, 2023, from https://www.eia.gov/outlooks/steo/.
Kee, J., Cardell, L., Zereyesus, Y.A. (2023, September 18). Global Fertilizer Market Challenged by Russia’s Invasion of Ukraine. USDA-ERS. Retrieved September 20, 2023 from, https://www.ers.usda.gov/amber-waves/2023/september/global-fertilizer-market-challenged-by-russia-s-invasion-of-ukraine/#:~:text=Russia's%20invasion%20of%20Ukraine%20drove,of%20grain%20markets%20in%202022.
Paulson, N., Schnitkey, G., Zulauf, C., Colussi, J., Baltz, J. (2023). Fertilizer price decline may impact farmer’s nitrogen decisions. Michigan Farm News. Retrieved September 27, 2023, from https://www.michiganfarmnews.com/fertilizer-price-decline-may-impact-farmers-nitrogen-decisions.
USDA-ERS. (2023, August 31). Summary of U.S. Farm Income Financial Indicators. Retrieved September 26, 2023, from https://www.ers.usda.gov/data-products/farm-income-and-wealth-statistics/data-files-u-s-and-state-level-farm-income-and-wealth-statistics/.
USDA-ERS. (2023, August 31). Highlights from the August 2023 Farm Income Forecast. Retrieved September 26, 2023, from https://www.ers.usda.gov/topics/farm-economy/farm-sector-income-finances/highlights-from-the-farm-income-forecast/.
USDA-ERS. (2023, August 31). Farm Income and Wealth Statistics. Retrieved September 26, 2023, from https://www.ers.usda.gov/data-products/farm-income-and-wealth-statistics/.
USDA (2023, September 22). USDA Launches Program to Support Agricultural Employers and Farmworkers, Aiming to Increase Economic and Supply Chain Resilience as Part of President Biden’s Investing in America Agenda. Retrieved September 28, 2023, from https://www.usda.gov/media/press-releases/2023/09/22/usda-launches-program-support-agricultural-employers-and.