“Hope springs eternal.” Alexander Pope didn’t have farmers in mind, but certainly could have when he penned those now-immortal words. As the calendar rolls through April, however, and as a new Salinas growing season begins, normal optimism for tri-county growers is muted.
As mentioned in prior posts, growers are facing increased cost headwinds the likes we’ve never seen before. The critical question of how the growing community hopes to manage these skyrocketing costs from only measured acceptance of inflationary growing costs increases. Below are a few examples of the year-over-year cost increases burdening us.
All petroleum-based byproducts have been increasing for months. With the conflict in Ukraine, however, the peripheral fallout costs continue to increase by the week. Drip tape used for crop irrigation has been a staple utilized by growers for over twenty years. Drip tape utilization plays a vital in growers’ water conservation practices as well sustainability programs.
The year-over-year price increase of drip tape is in excess of 30%. We are all feeling the pinch at the gas pump every time we fill our cars. As growers, our reliance on diesel fuel to work our ground, plant, and cultivate, is a necessity of farming. In February 2021, the cost of a gallon of diesel fuel was $2.85 per gallon. Fast forward to February 2022, the cost of a gallon of diesel now costs $4.05 per gallon, representing a staggering 40% increase.
The final petroleum-based byproduct to mention whose year-over-year percent increase continues its breakneck pace — fertilizer. For ALL growers in pursuit of producing the highest-yielding and best-quality corn, grain, fruit or vegetables, the use of chemical fertilizers is a necessity. One of many roles a grower assumes is steward of his land. As such, it is of critical importance to know the level of all materials needed to apply to our crops.
Similarly, to the use of drip tape, the level of fertilizer used is a benchmark of conservation and sustainability programs, as well as cost efficiencies. This year’s fertilizer cost increase in part depends on the specific type of fertilizer. To give you an example, the price of a popular fertilizer UN32 witnessed a price increase of over 160% from 2021 February thru October 2021. And since March the percent price increase is now over 200%.
These fertilizer price increases are truly staggering. The final example we’re citing, but certainly not the last growers are contending with, is seed costs. Seed costing is a little tricky, mainly because some seed is more in demand, so it’s priced accordingly. Based on broad averaging, however, the 2022 increased seed costs a low end of 9%, up to a high of 22%, with a majority in the 16%-to-20% range.
These examples of inflationary costs that growers are contending with this year are real. The average growing cost pass-through increase required will vary by grower. Cost analysis, however, suggests aggregate growing costs increases above last season appear to be in the 8%-to-12% range.
In an environment where retailers continue celebrating record profits, and processors pass along finished good increases based upon their COGs increases, making growers whole on their increased costs will benefit the supply chains in the short and long term. Applying financial pressure to the origins of the produce supply chain can only serve to undermine its future.
