Farmers facing more headwinds in 2023

By Sean Ellis

Idaho Farm Bureau Federation

POCATELLO – Last year, many farmers and ranchers received record or near-record prices for the agricultural commodities they produced. This year is shaping up to be a different story.

Last year was marked by high farm-level commodity prices but also record farm production costs.

In 2023, farm-level prices for most ag commodities are trending downward while input costs are holding steady and even increasing in some cases.

“Our input costs are all the same basically but prices are way down this year,” said Downey hay farmer Fred Burmester. “We’re going to try to stay profitable, maybe, but it’s going to be tight and it will be hard.”

Rupert farmer Mike Wilkins said he likely will make more money from his barley crop this year but it’s a far different story with his hay crop.

“We’re lucky we got a little more money this year for our barley but our hay is way off,” he said, adding that his overall farm production costs will be up a little in 2023 compared with 2022.

Wilkins said his hay crop looks good, “but the prices, man! We’re off $60-70 a ton. That’s $420 an acre. That’s a big hit and that cuts pretty deep.”

Shelley potato farmer Bryan Searle said 2023 certainly won’t be any less challenging than last year financially and he expects his overall input costs this year to be a little higher than they were in 2022.

According to estimates by University of Idaho agricultural economists, the state’s agricultural producers had a record $8.9 billion in total production expenses last year. They also estimate Idaho producers brought in a record $11 billion in farm-gate revenue in 2022.

With farm-level prices for many ag commodities on the decline, total farm revenue in Idaho will almost surely be down in 2023. With production costs holding steady, at record levels, this year is shaping up to be much more financially challenging for the state’s farmers and ranchers.

“I think it will be more challenging this year,” Searle said in late July. But, he added, potato yields and quality will be big factors in how the state’s spud farmers fare financially in 2023 and both those factors are unknown right now.

“The verdict is still out,” said Searle, president of Idaho Farm Bureau Federation. “We have a long way to go from now until harvest.”

A recent Market Snapshot report by AgWest Farm Credit predicts a mixed bag for Idaho’s top ag commodities over the next 12 months when it comes to profitability.

AgWest is part of the 107-year-old Farm Credit system, a financial cooperative with $30 billion in total assets that provides financing and related services to farmers, ranchers, agribusinesses, rural homeowners and crop insurance customers primarily in seven Western states.

AgWest’s 12-month profitability outlook for dairy, Idaho’s No. 1 ag commodity in terms of total revenue, is not good.

According to estimates by University of Idaho agricultural economists, Idaho’s 360 dairy operations brought in a combined $4.2 billion in farm-gate revenue last year.

The Market Snapshot report suggests slightly unprofitable returns for the state’s dairy operations. According to the report, “dairies face headwinds from weakening milk prices and elevated feed costs.”

“Dairy margins have been squeezed throughout 2023 with lower milk prices and persistently high production costs,” the report adds … “Dairy margins will remain tight for the foreseeable future.”

Weakening export demand is not a great development for the U.S. dairy industry, according to the report.

“This is a concern for the dairy industry, as milk production is growing faster than demand,” it states.

The Market Snapshot report forecasts a different situation for the Northwest beef cattle industry. It suggests profitable returns for cow-calf producers and slightly profitable returns for cattle feeders.

Beef cattle is Idaho’s No. 2 agricultural commodity in terms of total farm-gate revenue and the state’s ranchers brought in an estimated $1.9 billion in farm-gate revenue last year.

“Cow-calf producers will benefit from record cattle prices and improving pasture conditions,” the report states. “Cattle feeders will benefit from higher cattle prices, but profits will be challenged by elevated feed costs and inflation.”

The report adds, “Favorable cattle prices and strong demand for beef are creating a promising year for western cattle ranchers.”

The Market Snapshot report suggests profitable returns for contracted and uncontracted potatoes over the next 12 months.  

Potatoes are Idaho’s No. 3 ag commodity and No. 1 crop in total revenue. The state’s potato farmers, who plant about 300,000 acres of spuds each year, brought in an estimated $1.3 billion in farm-gate revenue last year.

The report said Idaho producers are concerned about yields and potato development because late planting and wet field conditions delayed potato growth.

“Despite these challenges, growers remain optimistic, especially as Idaho’s irrigation supply significantly improved from 2022,” the report states … “Potato growers are optimistic about the upcoming growing season despite input cost headwinds. The weather will largely determine the quality of the 2023 Northwest crop. So far, favorable weather has potato growers expecting good yields.”

The Market Outlook report suggests slightly profitable returns for alfalfa hay and break-even returns for timothy hay.

Hay is Idaho’s No. 4 agricultural commodity. Idaho farmers typically harvest about 1.2 million acres of hay each year and the state’s hay farmers brought in an estimated $725 million in farm-gate revenue last year.

“Drivers include June storms dampening first-cutting hay quality, lower hay prices and decreasing cost of production,” the AgWest report states. “Export quality hay faces headwinds from weak buyer demand and ongoing port challenges.”

The report notes that alfalfa is a major feed component for western dairies and dairies have been purchasing less hay due to declining milk prices.

“Inventory carryovers and better growing conditions will soften hay prices from 2022 records,” the Market Snapshot states. “Hay producers should expect prices to continue a downward adjustment throughout the fall.”

According to the report, production prices for hay farmers are declining as fertilizer and fuel prices have come down from 2022 highs.

“While hay prices have softened, production cost reductions will support hay profitability,” the report states.

The Market Snapshot’s 12-month outlook suggests slightly profitable returns for small grains, which include wheat and barley.

Wheat ($706 million in farm-gate revenue in 2022) is Idaho’s No. 5 agricultural commodity in terms of total revenue and barley ($357 million) ranks No. 7.

Idaho farmers typically plant about 1.2 million acres of wheat and 550,000 acres of barley.

According to the Market Snapshot report, drivers in the small grains market include a smaller winter wheat crop, geopolitical tensions and forecasted record global wheat production.

The report states that global wheat production is forecast to hit a record of more than 800 million tons produced this year.

The U.S. exports the highest-quality wheat but it is also one of the most expensive, and countries are only willing to pay a premium for that wheat up to a certain point, according to the Market Snapshot

“Strong global production will put downward pressure on global and U.S. wheat prices,” the report states. “However, weather still poses the greatest risk to global production and any significant weather challenges to major wheat exporting areas could have a bullish influence on world prices.”

The Market Snapshot suggests profitable returns for sugar beet farmers in the Northwest. Sugar beets ($385 million in farm-gate revenue in 2022) rank No. 6 among Idaho agricultural commodities.

Idaho producers typically plant about 170,000 acres of sugar beets each year.

“Drivers include favorable growing conditions, an improving irrigation outlook and tight global inventories creating upward price pressure,” the report states. “Sugar beet growers will benefit from favorable planting and market conditions.”

Tight global supplies are supporting strong sugar prices, the report states.

“The domestic sugar price outlook is bullish as anticipated reductions in sugar beet and cane acres will limit supplies, therefore supporting higher prices,” the report states … “Input costs are slowly coming down while prices should increase, leading to a profitable 2023 crop.”