In a hot commodity market like the one we have now, it is very easy to get too fixated on what commodity prices are.
Steve Troxler, North Carolina Commissioner of Agriculture, is urging farmers not to forget that the bottom line on a farm depends just as much on input costs, he said. “They should play a part in any decision on what to produce.”
In an agricultural forum presented by the North Carolina Department of Agriculture in conjunction with the Southern Farm Show, Troxler and other speakers agreed that despite the upward trend, farm commodity prices have gone up less than other commodity prices. They have also gone up less than the overall price index.
Still, Troxler was cheered to note that for the first time in five years, he was seeing a little more optimism among farmers than the year before.
Commodity prices rise and fall, but 2011 is shaping up as unique, said Troxler.
“I’ve never seen a situation where all the commodities we grow are attractive in price,” he said. “From commodity to commodity, all the prices that are out there look very, very attractive.”
Whatever happens with plantings of other crops, Troxler said he is expecting a huge increase in cotton production in the state.
Ironically, he said, when you look at profit margin versus risk, tobacco — long the big-money crop for Tar Heel farmers — is probably close to the bottom of the list.
“It is still a high-value crop. There is a profit margin available. But there is also a tremendous amount of risk and overhead involved.”
He predicted that some potential tobacco acreage might go into cotton or feed grains this year.
A Fremont, N.C., flue-cured grower said at a tobacco meeting later in the Show that migration of tobacco acreage to other crops is quite possible this season.
Tobacco bringing up the rear
Craig West,president of the Tobacco Growers Association of North Carolina, said that for the first time in his farming career, tobacco is worth less on a per-acre basis than many crops that could be good alternatives.
“The one-time king of cash crops in North Carolina has slipped to the low value commodity in today’s row crop operation,” he said.
Now, tobacco farmers with a chance to increase plantings have a difficult decision to make.
“With the sting of 2010 still fresh in the wallet, and with competition from $7 corn, $16 soybeans and $1-plus cotton, it is challenging to contemplate expanding tobacco acres,” said West. “We know that cost of production will be up. The increase could be 15 percent to 20 percent.”
Another speaker, Jay Brinn, sales manager of East Coast Equipment Co. of Wilson, N.C., said the dynamic of farming and machinery has been altered in recent years by the popularity of relatively specialized crops.
“Now, much of our equipment is very specialized,” he said. “A cotton picker only picks cotton. It can’t do anything else.” (For a look at what growers are thinking about equipment purchases this year, visit http://southeastfarmpress.com/equipment/high-commodity-prices-drive-farm-machinery-demand.)
Many of the more specialized crops are also very high-input cost crops, he said. “It’s a very high per-acre cost just to get them in the ground.
“And when you make a very high-value capital investment like that, you are essentially locking yourself into growing that crop for a number of years. So you lose a lot of flexibility in your year-to-year decision making.”
When you lock in four or five years of growing a very high-input crop, you can expect some apprehension from the lending institutions, said Brinn.
“The biggest struggle I see for most farmers is that they are losing the flexibility (of crop choice) on an annual basis,” he said. “Everything is getting locked down tight for multiple years.”
Brinn said his company is trying to develop strategies and put procedures in place that will allow farmers to get the equipment they need when they need it. He hopes his company can use special programs and discounts at the same time.
With increased plantings a near certainty, Commissioner Troxler said there was one source he wishes farmers could tap. “I see lots of houses for sale on former farmland,” he said. “North Carolina would be better served returning that land to ag.”
Troxler led an agricultural trade mission to China starting March 6. The trip focused on selling more Tar Heel tobacco, soybeans, wheat, cotton and peanuts to China, which is fast becoming North Carolina’s largest market for agricultural exports.
The trade mission was to include meetings with current and potential buyers of these commodities, as well as field visits to learn more about commodity use and customer needs.