The Farm Credit Canada says producers have to look at all agriculture input costs despite the attention the cost of fuel is getting.
J.P. Gervais is the chief agricultural economist for FCC.
“The squeaky wheel tends to get most of the attention, but falling oil prices are only one piece of the farm input puzzle,” says Gervais. “Producers need to pay attention to the full spectrum of input costs in order to make wise business decisions."
Gervais cautiions there is a lag time between falling energy prices and a reduction in the price of farm inputs. And while gasoline prices have come down with the reduction in oil prices, the price of diesel is still resilient through the winter months when demand for different fuels eats into the supply.
Farm fertilizer costs also don’t necessarily go down with the price of oil, since natural gas is the main input in fertilizer production. Lower oil prices, however, mean lower costs for extraction, distribution and transport of fertilizers.
Lower commodity prices should begin to slow the rate of increase in farmland values throughout the country over the past decade, with few exceptions.
And strong equipment sales over the past few years have built up inventories across the country, which may translate into a buying opportunity for used equipment.
FCC is Canada’s leading agriculture lender, with a healthy portfolio of $27.3 billion and 21 consecutive years of portfolio growth.
