Iowa Public Television


Input Prices Increase

posted on May 2, 2001

Hello, I'm Mark Pearson.

Despite four consecutive interest rate cuts, and a first-quarter up-tick in gross domestic product, the nation's economy appears to be slowing. Widespread lay-offs have accrued. The nation's unemployment rate in April shot to 4.5 percent, the highest level in 2 and a half years. Consumer spending has slowed, especially for big-ticket items, and manufacturing activity declined for the ninth consecutive month.

On Wall Street the sentiment is it's now safe to at least cautiously re-enter the market. If there is a bright spot in the economy, it's in the farm export sector. A weaker dollar is expected to boost agricultural exports this year by 4 percent to 53-billion dollars. This is not say, however, that farmers will be making more money this year.


This growing season is promising to be more expensive than last year. The cost of petroleum-based products like anhydrous ammonia is on the rise due to a whole host of supply issues including the spike in natural gas prices this winter that shut down some fertilizer production facilities. Adding to the expense of petrochemicals is a delay in barge traffic on the flooded Mississippi. More expensive transport of fertilizer using trains and trucks likely will begin as stockpiles in the upper Midwest run out. Those increased costs will be passed along to the buyer. Farmers are projected to spend an additional two to three billion dollars this year to meet fertilizer needs.

Increased costs have NOT stopped the annual planting frenzy. Dry conditions helped planting progress in primary corn growing states pushing total planted U-S acres to 28 percent. And cotton planting is ahead of the average pace with one quarter of the crop in the ground.

On the flip side, only 18 percent of the spring wheat has been planted, markedly behind the five-year average of 32 percent. And winter wheat is continuing to struggle; 59 percent of the crop is rated fair to very poor.

In the meantime, Congress is attempting to write agriculture rescue funds into near- and long-term budgets. Farm bailout packages have been prevalent over the past four years. Last year, the bailout totaled nine point seven billion dollars.

Lawmakers have allotted billions for use over the next decade, but the most significant number is the five-point-five billion dollars already earmarked as bailout money in anticipation of this year's agricultural rescue.

Farm state leaders are looking for ways of utilizing the anticipated bounty of this year's crop. Environmental and energy challenges are encouraging greater use of ethanol. In Illinois, legislation awaits only the governor's expected endorsement to phase out the use of M-T-B-E.

The petroleum derivative has been used to curb air pollution, but has been found to have contaminated water supplies in several states. The fact M-T-B-E is the major competing additive to ethanol makes its phase-out in corn-rich Illinois a political no-brainer

Tags: agriculture crops finance money news