The cost of seeds, fuel, fertilizers, machinery, and labor in the United States have skyrocketed, reducing profits for American farmers, while farm tractor manufacturers struggle to keep up with demand.
Farmers were already suffering from soaring energy costs before Russia’s invasion of Ukraine further raised the price of fuel and fertilizer required for agriculture.
Food producers are deciding whether to scale back the use of fertilizers, reduce crop yields, or push up food prices in order to stay financially afloat without hurting Americans at the supermarket.
The big fertilizer shortages are creating a rift between the major food producers over the sanctions on Russia, which is one of the world’s largest exporters of crop nutrients.
Countries like Brazil oppose the United States and its Western allies, arguing that Russian fertilizer supplies should not be touched by sanctions, in order to maintain domestic food production and exports.
Many farmers are grappling with supply costs that have risen faster than the price of agricultural goods.
The worsening shortages of raw materials have also hit farm equipment manufacturers with increased costs.
Sanctions on Russia have reduced the world supply of strategically important metals and other key resources desired by manufacturers, pushing up prices.
Meanwhile, the surge in crude oil past $100 a barrel is the worse seen in almost a decade.
The two-year global chip shortage is also forcing vehicle manufacturers to bring production for key parts like electric vehicle batteries in-house.
Rising inflation rates are forcing the companies, like their farmer counterparts, to prioritize a balance between the growing operational costs and how much of the expense to pass on to consumers.
The major manufacturers are attempting to preserve their earnings, as raw materials costs begin to impact the production of big equipment like tractors.
Many are attempting to keep up with increased demand, as farmers flush with stimulus cash over the past year have been ordering record levels of equipment.
To keep their margins intact, some of these firms are scrambling to secure alternative suppliers of key materials like lithium and mercury through longer-term contracts or new mining investments.
February tractor sales remained steady, as farmers are expecting higher crop prices this year.
The price of grain had increased 9.2 percent from the same month last year, according to the recent report from the Association of Equipment Manufacturers.
Agricultural income is expected to drop by $5.4 billion from 2021, as federal aid payments given during the pandemic are reduced, according to the U.S. Department of Agriculture.
Friends Read Free