Inputs Eating into Farm Income

Higher crop prices also mean higher input costs.

Farmers are seeing high commodity prices unlike any they've ever seen before. But they are also seeing rapidly increasing prices for the inputs to produce those crops.

"We've had multiple years of substantial increases in cost," says USDA economist James Johnson. "We think production expenses will increase by over $20 billion this year, or nearly 9%."

According to Johnson that increase is on top of the 11% increase in input costs last year. And USDA Chief Economist Joe Glauber says producers who have waited until the spring to purchase inputs are really being hit hard.

"We look at the January 2008 index of prices paid for fertilizer and it is up 32% on the year," Glauber says.

With everything from fuel to feed costs expected to be up by double-digits this year, that is tightening the margins for producers. Johnson says about 72 cents of every dollar of cash income this year will go toward production expenses compared with 68 cents six years ago.

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