Vegetable and Melon Outlook - Rapid input price increases sqeeze farmers

The June 26 USDA ERS Vegetables and Melons Outlook report is available here. Gary Lucier and Rachael Dettman authored the report and headlined the summary with the discussion of fast-rising input prices:

Vegetable and melon net returns are being eroded by rapidly escalating input prices, particularly for fuel and fertilizer. Based on an index calculated by ERS using items pertinent to vegetable production, average input prices paid by vegetable and melon growers increased 7 percent in 2006, 8 percent in 2007, and are currently running 14 percent above a year earlier so far in 2008. At the same time, average prices received by commercial vegetable growers have not kept pace and are currently running below a year earlier.


More highlights from the report:


Tablestock Russet potatoes shipped from Idaho increased 70 percent to $14.63 per 50 pound carton. Multiple factors may explain increased tablestock prices including quality concerns in the 2007 storage crop, decreased spring acreage, delayed development in summer and fall crops, and increased export volume.
Sweet potato production has risen an average rate of 5 percent annually since 1998, due to improving demand for fresh and processed sweet potatoes. Demand will likely remain strong well into next year due in part to the increased popularity of sweet potato fries, which can now be found on restaurant menus across the nation.

More highlights..or lowlights.....


Fresh vegetables: During the first 5 months of 2008, fresh-market vegetable prices at the point of first sale (e.g., grower or shipping point) averaged 16 percent below a year earlier. Lower average prices were received for vegetable crops such as celery, cucumbers, lettuce, snap beans, and carrots, easily outweighing higher average prices for tomatoes and cauliflower. With a large storage crop last fall, fresh drybulb onion prices were a fraction of the highs of a year earlier through April. Fresh vegetable shipping-point prices will likely be under upward pressure this summer as growers battle higher production costs and water-related issues.
Melons: Similar to the situation a year ago, spring supplies have begun to improve after a late start caused by a combination of cool, wet weather. April-May producer prices for melon crops averaged 17 percent above a year ago. However, although May shipments of watermelon, cantaloup, and honeydew increased seasonally, only watermelon volume managed to exceed year-earlier levels. As a result, average melon prices during May remained near the highs of a year ago.
Mushrooms: During the initial 5 months of 2007, the average import value for fresh agaricus mushrooms declined 9 percent from a year earlier to $1.24/pound. During the same time, the average import value for non-agaricus specialty mushrooms increased 15 percent to $0.84/pound.

More on input prices...

Input prices play a major role in farm production expenses and farm profitability. Over the past decade, prices paid (unadjusted for inflation) by vegetable and melon growers for production inputs have moved steadily higher. An index calculated by ERS using items pertinent to vegetable production (leaves out farm-origin inputs like feed and livestock) indicates that average input prices increased 7 percent in 2006, 8 percent in 2007, and is currently running 14 percent above a year earlier in 2008. This easily exceeds price changes in the general economy over the past few years. At the same time, average prices received by commercial vegetable growers have not kept pace and are currently running below a year earlier. Price changes are not the only factors determining net farm revenue. Over the long run, rising yields can help spread escalating costs over more units, keeping the farm cost per pound of vegetables down. However, when input prices rise sharply over a short period of
time as they have since 2007 (fig. 10), increases in per-acre yields can not overcome these rapid cost increases, pulling net revenue down.

TK: The 41-page USDA report includes a table show second quarter 2008 input costs rising, compared with the second quarter a year ago, by 30% for seed, 64% for fertilizer and 46% for fuels.