Input Costs to Remain Stubbornly High: FCC

There will be no immediate relief for Canadian farmers from rising input costs, according to new forecasts released by Farm Credit Canada.

In its final quarterly update to its 2021 outlook for major crops first published in February, FCC also looked at fuel and fertilizer costs out into 2022-23. It forecast the gains in surging fuel prices will taper off in 2022-23 but said prices for anhydrous ammonia, urea and phosphate are likely to keep increasing at their current pace, while potash could take another leap after a pause (see table below).

Numerous factors are keeping input costs high globally, FCC said, perhaps most notably slowdowns in fertilizer exports from China, where an energy crisis looms. Because China supplies roughly 30% of global exports of urea, sulphate and phosphate, and with Europe’s energy crisis and continued global supply chain woes, the slowdowns have implications for 2022 seeding plans, the farm lender said.

“Widescale moves to seed more crops that are less fertilizer-intensive could heap added pressure on crops already experiencing tight stocks,” FCC said, suggesting the potential for few corn acres but more of soybeans and pulses in 2022.

Although sustained global demand and tight stocks is expected underpin Canadian profitability in grains and oilseeds to close out 2021, FCC warned the drop in this year’s Prairie production due to drought and the spectre of input costs rising even higher will require good business planning and risk mitigation strategies in the next year.