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Lower Costs Buffer Crop Price Declines

Falling prices of inputs like fertilizers and agrochemicals from levels seen in 2008 could make this a “decent” year for U. S. farmers despite lower crop prices, an analyst with Rabobank America said on Feb. 26.

Farmers’ profits will not match 2008 levels, when grain prices hit record highs, but as these prices have fallen over the last few months other costs have also eased, said Rabobank’s food and agribusiness analyst Erin FitzPatrick.

“We can expect to see higher input cost to farmers (compared to the historic level), however, it’s not as dramatic as we thought it was going to be,” FitzPatrick said in an interview on the Dutch-based bank’s website.

“So overall, we can expect U. S. farmers to have a decent year.”

After hitting record-high levels in mid-2008, prices of major inputs like fertilizers are seen softening as demand has weakened.

Retailers holding high-cost inventories of fertilizers are still hesitant to sell at a lower cost, but this could change in the coming months, FitzPatrick said.

“As the planning season rolls out, we expect to see some meeting of the minds on prices and volumes for fertilizers,” she said.

In the seed market, companies have extended pre-purchase programs and increased discounts to farmers, while agrochemicals prices are expected to drop as more supply comes online later this year and into 2010, FitzPatrick said.

Commodity prices have fallen sharply since setting records in mid-2008. Corn and soybean prices are down about 50 per cent while wheat has dropped 60 per cent. Prices however, remain above historic levels.

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