AG/BUSINESS
A10 • HERMISTONHERALD.COM
WEDNESDAY, JUNE 8, 2022
Gas prices put
Cattle markets
profits on the line complex in 2022
BY JOHN TILLMAN
Hermiston Herald
BY CAROL RYAN DUMAS
Capital Press
Agricultural producers are
paying record-high tabs for cru-
cial fertilizers.
The agricultural data analysis
service DTN reported import-
ant fertilizers doubled from the
first week of May 2021 to 2022.
Anhydrous ammonia reached
an all-time high of $1,534 per
ton in April and stayed the same
in May. Urea also hit a record
of $1,031 per ton in April then
dropped slightly to $1,001.
Anhydrous was barely above
$400 in September 2020, but
has zoomed upward more than
250% in less than two years.
Fertilizer inflation has out-
paced even gasoline, diesel and
natural gas price hikes. Produc-
ing nitrogen fertilizers ammonia
and urea requires natural gas
feedstock. Despite high prices
for fuel, fertilizer and other pe-
troleum products, though, some
local farmers and ranchers re-
main cautiously optimistic.
“As long as wheat prices
stay up, I’m OK with high
inputs,” Wheat and cattle
rancher Tim Leber of Umap-
ine said. “Where I get nervous
is if wheat crashes, while we’re
stuck with high inputs, as hap-
pened in 2008 to 2010.”
In 2008, soft white wheat prices
were almost as high as 2022.
Leber already has top-dressed
his fields, to take advantage of
the spring rains. And there was
a jump in wheat price as India
banned export of the staple ce-
real, due to its heat wave.
Leber noted that major wheat
exporter Ukraine is managing
to plant, despite the war.
“Even with the ports closed,
they’ll find a way to get it out,”
he said.
Still, looking ahead to his
likely fertilizer bill in the fall is
worrisome.
“We’re paying 50 cents per
pound more than last fall, but
that’s as of now,” he said during
a recent interview in May. “Fer-
tilizer could keep going up.”
The supply of fertilizer die-
sel dried up on the East Coast,
he added, and that shortage
can mean higher prices on the
West Coast.
U.S. natural gas prices are at
a 14-year high, according to re-
cent reporting in The Financial
Times. Keeping orchard and
fruit crops from freezing requires
propane and diesel, as well.
“Orchardists and fruit grow-
ers power their wind machines
The cattle market outlook
for 2022 is a mixed bag, an ag-
ricultural economist says.
On one hand, cattle prices
are higher year over year. On
the other, cattle ranchers are
facing higher input expenses.
At $140 per hundred-
weight, slaughter steer prices
are 17.5% above 2021 prices.
“But even with higher
prices, farmers and ranch-
ers will travel a rocky road to
profitability, paved with in-
flation and higher input costs
in 2022,” said Bernt Nelson,
an economist with American
Farm Bureau Federation.
Producers are facing in-
creases in both feed and non-
feed inputs, resulting in in-
creased break-even prices.
“Whether cattle prices will
increase enough to offset the
increase in costs and pro-
vide profitability remains in
question,” he said in the latest
“Market Intel” report.
“One of the greatest con-
cerns faced by farmers and
ranchers in 2022 is rising in-
put costs, more specifically,
feed,” he said.
While cattle prices and
input costs vary across the
country, estimates for Iowa by
Kathy Aney/Hermiston Herald
Umapine farmer Tim Leber on May 31, 2022, leans against the Case
Quadtrac tractor he uses to fertilize and seed his crops. Fertilizer prices
have doubled in the past year.
with propane,” said Roger Lem-
strom of Los Rocosos Vineyards
in Milton-Freewater’s Rocks
District. Besides using these gi-
ant fans for warming, they still
use old-fashioned smudge pots
fueled by diesel, he noted.
HIGH PETROLEUM PRICES SLAM
LOCAL FRUIT GROWERS
It’s not just pain at the pump
for local farmers and orchard-
ists. High prices for other pe-
troleum products, such as ag-
ricultural chemicals squeeze
growers’ profits.
“(Inflation) differs by region,”
said Corey Coad, president of
agricultural supplies at Orchard
& Vineyard Supply, with loca-
tions in four states. He’s based
in McMinnville, but is famil-
iar with OVS’ business in Mil-
ton-Freewater.
“In some areas, fertilizer
prices have shot up by 500%,” he
said. “In the Pacific Northwest,
it’s 50% to 150%. For pesticides,
it’s 175% since January of 2021.”
Coad explained the problem
isn’t just with supply and de-
mand for hydrocarbons. Ship-
ping containers are in short
supply as a result of pandem-
ic-induced interruptions to
international trade. Many ac-
tive ingredients in agricultural
chemicals come from overseas.
“Then there’s the cost of fuel,
especially diesel, which impacts
everything farmers do,” Coad
noted. “Spraying, cultivation,
you name it. Diesel is up 39%
from January of this year.”
Crop nutrient prices also rose
as a result of sanctions on sup-
plier Belarus, curbs on Chinese
fertilizer exports and sanctions
on Russia, a big provider to Bra-
zil, according to Reuters in May.
The cost increases, combined
with fuel, lubricant and other
agricultural chemical cost hikes,
mean farmers may have trou-
ble turning a profit even with
higher crop prices. Ukraine is
a major wheat exporter, so war
on the Black Sea has naturally
boosted grain prices.
Midwest farmers have
adapted by planting more ni-
trogen-fixing soybeans and less
corn, but enduring drought re-
duces yields for all crops. North-
east Oregon farmers and ranch-
ers have fewer options, with
the market for peas so much
lower than in previous decades.
Canola is not a legume.
Don Wysocki, local Oregon
State University Extension soil
scientist, said one option is to
grow a nitrogen-fixing cover
crop, such as peas. The crop is
terminated before its water use
threatens grain yield, but still
adds some nitrogen to the soil.
Cover crops can be planted in the
fall or spring, but it’s always a risk
in the fall, since producers can’t
know how wet the winter will be.
Management practices also
can make less fertilizer go far-
ther, such as split applications.
Again, growers don’t know how
much moisture to expect, so
Wysocki recommended apply-
ing an average amount in the
fall, then top dressing in the
spring. With a wet winter and
spring, such as this year, farmers
can get more crop growth per
fertilizer buck by applying when
it’s most needed.
Costlier application meth-
ods can save on fertilizer. Liquid
solutions applied with pesticides
in the spring make both agricul-
tural chemicals more efficacious.
“Producers might want to
consider whether to bale their
straw or not, now that the
value of nitrogen has gone up,”
Wysocki said.
Wysocki also said the war
affected both supply and Black
Sea shipping and he didn’t see
change coming abruptly.
Iowa State University give a
general idea of current condi-
tions versus a year ago.
In estimating returns to
finish a yearling steer, total
costs for April are estimated
at $1,832.86. Of those to-
tal costs, feed accounted for
25.4% or $465.35.
Feed cost this April in-
creased nearly 12% year over
year, and that increase was
even steeper in March —
up 22%.
Given a sales value on
the finished yearling of
$1,872.78, an Iowa cattle
feeder is looking at a $39.92
per-head profit in April, ac-
cording to the university’s es-
timates.
But there’s more to markets
than cattle prices and input
costs. Supply and demand
also factor in, he said.
The cattle supply is forecast
to decrease, as the industry
is in the contraction phase of
the cattle cycle. The calf crop
on Jan. 1 was down 1.2% year
over year, and the cow in-
ventory was down 2.3% year
over year.
While USDA is forecasting
only a small decrease in do-
mestic consumer consump-
tion, beef imports also play
a factor in markets — and
those imports in March were
up 29% year over year.
On the flip side, USDA is
forecasting a 1.8% decline in
U.S. beef exports in 2022 —
although still well above the
five-year average.
“A strengthening U.S. dollar
will make it more expensive
for other countries to buy U.S.
beef while at the same time
making it more affordable for
the U.S. to import beef from
other countries,” he said.
Yet, first quarter beef ex-
ports were reported at record
levels, primarily to the Asian
markets with China leading
the way, he said.
“All these factors create a
complex cattle market out-
look complete with many
peaks and valleys for 2022,”
he said.
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