Despite a drought, the pandemic and supply chain issues, food producers have managed an impressive year.
"The farm economy has turned around," economist John Newton told hundreds of industry insiders at Thursday's Ag & Food Summit in Minneapolis.
But, he warned: "Outside of a run-up in commodity prices, it's going to be short-lived."
Reinvigorated global food demand has helped push U.S. agricultural exports to record highs in 2021, and farm profits are expected to surpass $130 billion, their highest levels in years. But increased costs for energy, fertilizer and other inputs have food producers nervous for 2022 and beyond.
Newton, who works for Arkansas Sen. John Boozman, the top Republican on the U.S. Senate agriculture committee, said food price inflation and labor shortages are also weighing on farmers. "They're not optimistic," he said.
Purdue University's Ag Economy Barometer showed deepening pessimism among farmers surveyed in late October, a result of "weaker perceptions regarding both current and future conditions."
"Rapidly rising input costs are leading farmers to become concerned about a cost-price squeeze on their operating margins," the study, released this week, said. Most farmers surveyed by Purdue expect overall costs to rise at least 8% over the next year. Historically, farm inputs rise an average of about 2% per year.
A major rebound in commodity prices, which plunged in the early months of the pandemic, has not been enough to offset concerns about rising prices. Compared to January 2020, prices for spring wheat are up 73%; corn is up 45%; hogs have increased 38%; and soybean prices are up 28%, according to Senate Agriculture Committee data shared by Newton.
Fertilizer, as tracked by Bloomberg, has doubled in the past year to more than $1,000 a ton, partly due to increased natural gas costs. The U.S. Energy Information Administration expects fuel prices to remain elevated in 2022 though largely not exceed 2021 levels.
Minnesota Gov. Tim Walz struck a more hopeful note in a brief speech at Thursday's summit.
"Even in challenging times, the innovation, the consistency, the compassion, the sense of getting the job done with agriculture in Minnesota remains strong and optimistic," he said. "Minnesota's economy was, is and will be foundational around agribusiness and the things that we do to feed, fuel and clothe the world."