Unless the debates in Washington throw a shock into the system,
Georgia farmers can look for
normal, modest increases in their expenses during 1996.

“Farm input costs will be basically just keeping up with the
general rate of inflation,” said Forrest
Stegelin, an economist with the University of Georgia Extension
Service.

Heading into the end of December, Stegelin didn’t foresee the
1995 Farm Bill or balanced-budget
debates producing any cost shocks.

And nothing else seemed likely to drive costs up or down from
normal increases, he said.

“Farm input prices generally reflect many factors — demand,
supply, policy, institutions,
weather,” Stegelin said. “Prices of fertilizer, seed, chemicals
and fuel tend to be linked to
commodity prices and acres planted.”

Fuel costs could possibly rise if the weather in northern urban
centers is unusually severe this
winter, he said, but aren’t likely to greatly affect the overall
input costs, since fuel makes up such
a minor part of farmers’ expenses.

“Diesel, the prominent fuel used in agriculture, is a residual
product to home heating oil,”
Stegelin said. “If the early-December cold were to continue
through the winter up north, we
could have some fuel price increases come spring.

“But it wouldn’t have a tremendous effect, because agriculture
isn’t that big a user of diesel fuel,”
he said. “It’s big to farmers, but there’s probably more fuel
wasted at truck stops than farmers
use.”

Stegelin sees other input costs like this:

Fertilizer

Fertilizer prices have shown the least growth of all the major
farm inputs during the past 20
years, due mainly to shrinking planted acreage. But Stegelin
expects prices to rise somewhat
more in ’96, due to a changing balance in supply and demand.

Credit

Short-term interest rates may creep upward in ’96 due to Federal
Reserve policies to keep
inflation under control, he said. Interest rates are likely to
be one to two points higher than in
1995.

Pesticides

Prices have risen steadily since 1988, reflecting the industry’s
research and development,
registration and licensing, and marketing costs. Stegelin sees
no major change in the price trend.

Seed

“These prices depend on acreage planted and supplies, which are
determined primarily by the
growing conditions the previous year,” Stegelin said. With no
major crop failures last year or
great increases in planted acreage predicted for next year, he
doesn’t expect any major changes in
seed prices.

Hired Labor

“Wage rates have trended upward in recent years, reflecting a
tighter supply-demand relationship
for skilled labor,” he said. “Wage rates will likely continue to
rise.

“With more off-farm employment expected as the economy
strengthens,” he said, “either farm
labor rates will increase or mechanization will be stepped up to
keep pace with the demand for
food and fiber.”

Machinery and Equipment

Stegelin sees a number of factors that make increased machinery
and equipment purchases
likely: “relatively low interest rates, lower farm debt-to-asset
ratios, healthy farm receipts and
incomes and an inventory of aging machinery on farms.”

But he doesn’t expect to see great hikes in prices. “I think
most of the companies will just be glad
to see farmers making some purchases,” he said.