Farm input expenses rise slightly in 2011's third quarter

Monday, January 16, 2012

by SUSAN MANN

Farmers can expect volatility in the output price market to continue this year particularly for crops, says Alfons Weersink, an agricultural production economics professor at the University of Guelph.

“We saw the corn price go down the limit at the end of last week and weather scares could make it pop up again because the stock-to-use ratio is relatively tight still,” he says.

Weersink, of the university’s food, agricultural and resource economics department, made the comments in response to Statistics Canada’s release today of the farm input price index for the third quarter of 2011. The index rose 0.4 per cent in that time period and that followed a 1.5 per cent increase in the second quarter of 2011.

The relatively small farm input price index increase in the latest quarter mainly reflects the flat energy price during that quarter. But what did increase were inputs in the livestock sector, mainly feeders and weaners, and that’s due to increases in prices for cattle or hogs, Weersink says.

“The price for hogs has gone up so the price for weaners has gone up as well because that means hog producers are willing to pay some more for weaners,” he explains.

Statistics Canada figures show animal production costs, up 2.2 per cent, contributed the most to the quarterly movement of the index. “This component has been the largest contributor to the price movement in five of the last seven quarters,” it says in Statistics Canada’s Jan. 17 press release.

The increase in the cost of animal production was offset by decreases in general business costs, down 1.6 per cent, and machinery and motor vehicle costs, down 1.1 per cent, for the third quarter of 2011.

Canadian farm input prices increased 9.9 per cent between the third quarter of 2010 and the third quarter of 2011. All components of the index showed an annual increase but contributing the most were: animal production, up 14.7 per cent; machinery and motor vehicles, up 13 per cent; and crop production, up nine per cent, Statistics Canada says. The year-over-year farm input price index increased in all regions of Canada with Alberta, up 12.3 per cent, and Ontario, up 9.4 per cent, contributing the most to the increase.

Weersink says the year-over-year price increase reflects “the increase we have seen in output prices.” But the index hides the variability in output prices over the year. “We can talk about an increase in the average price over the year but there have been some real peaks in corn prices and some real lows.”

The actual margin depends on when farmers sold their outputs and when they bought their inputs, he says.

The farm input price index is an indicator of the change in Canadian farmers’ input costs. BF