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Editor’s word: The following was written by Gary Schnitkey and Nick Paulson with the University of Illinois Department of Agricultural and Consumer Economics. This is a presentation abstract from the 2021 digital Illinois Farm Economics Summit (IFES).
Since the peak of detrimental financial impacts of the pandemic in 2020, broad financial indicators counsel the U.S. economy has recovered and proven indicators of wholesome development in 2021.
U.S. gross home product (GDP) has returned to pre-pandemic development ranges, and the unemployment fee has declined again beneath 5% — increased than the years main into the pandemic however at what can be a low stage by historic requirements.
However, financial headwinds stay. While the unemployment fee has declined, the dimensions of the labor power has nonetheless not returned to pre-pandemic ranges. The pandemic probably led to older Americans selecting to go away the workforce sooner than in any other case, and youthful Americans have been extra hesitant to enter or return to work.
Demographics of the U.S. inhabitants counsel labor will proceed to be in comparatively quick provide with exiting employees exceeding these changing them for the foreseeable future.
At properly over 6% on the finish of 2021, inflation has elevated to ranges not skilled for over 4 a long time. While market indicators counsel inflation is predicted to return to decrease ranges, averaging 2.5% over the subsequent decade, a key query is when and the way rapidly development within the prices of products and companies will decline and, extra importantly, whether or not wage development can maintain tempo with inflation.
Much like the overall economy, farmers within the Midwest are experiencing increased farm incomes over the previous two years but additionally going through increased prices of manufacturing.
For 2021, farmers enrolled within the Illinois Farm Business Farm Management Association (FBFM) are projected to expertise document farm revenue ranges thanks to increased commodity costs and the lingering results of pandemic-related authorities funds.
Despite rapidly rising enter prices, return projections for 2022 are optimistic with commodity costs at present ranges. However, even reasonable value declines might end in detrimental returns for subsequent yr.
While enter prices are up throughout all main classes, nitrogen fertilizers have acquired probably the most consideration as prices have reached document ranges on the finish of 2021. While a easy pricing mannequin for anhydrous ammonia suggests a big threat premium is at the moment constructed into costs, it’s unclear whether or not that premium will decline by the 2022 planting season. Producers are inspired to think about a spread of methods for his or her 2022 crop fertility plans.
In normal, producers are suggested to cut back nitrogen fertilizer charges to acknowledge the elevated price. For instance, he Maximum Return to Nitrogen (MRTN) utility fee at present costs can be round 20 lbs. of nitrogen per acre lower than at decrease historic costs.
Producers are additionally suggested to think about cut up utility methods in order that general utility charges might be extra flexibly adjusted to modifications in costs between now and planting season.
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