Producing food and fiber doesn’t come cheap, and a newly released U.S. Department of Agriculture study reveals just how expensive it is.

“Farm Production Expenditures 2013 Summary” estimates U.S. farmers spent $367.3 billion in 2013 to run their operations. That’s $6.2 billion more than 2012.

The USDA study, based on farmer surveys, found that in 2013 farmers spent, on average, $175,270 to grow crops and raise livestock. The average crop farmer spent more than the average livestock producer: $211,659 to $143,521. However, while crop farmer spending rose 0.9 percent this past year, livestock producers saw their spending jump 3.4 percent.

Credit: U.S. Department of Agriculture

Feed was the single largest expense U.S. farmers incurred this past year. The other high dollar expenses were farm services, other livestock/poultry-related items and labor. The top four spending categories accounted for 45.6 percent of all farm expenditures. Fuel price increases also drove energy spending higher, the USDA reported.

It comes as no surprise that farmers dug deeper into their wallets this past year, say Matt Roberts and Chris Hurt, agricultural economists at Ohio State University and Purdue University, respectively. Higher production costs were one reason but so, too, were farmer investments, they say.

Despite the higher spending, farmers made money, Roberts says.

“Strong returns from row crop production have bid up the prices of most, if not all, inputs: land, seed and machinery,” Roberts says. “Energy prices went up due mostly to other issues such as the very cold winter, but ag demand also helped exacerbate those price increases. The 2012-2013 price increases won’t have that big of an affect on farmers’ profitability. The bigger affect comes from lower (commodity) prices in 2013 and 2014.”

Hurt says weather played a significant role in higher spending, especially for livestock producers.

“The biggest changes were probably related to general inflation and the drought of 2012,” Hurt says. “The drought contributed to record high feed prices in 2013 until we harvested the fall 2013 crops. Drought also contributed to feeder livestock prices that were higher in 2013. Calf prices were $1.61 a pound in 2013 and $1.57 in 2012. This is not a huge increase, but seems to be one of the categories they point to as contributing to the overall increases in expenditures.

“The services sector is partially influenced by general inflation. The general inflation rate in 2013 was modest, but still plus 1.5 percent for the year. General inflation tends to get into product prices through such costs increases as transportation, packaging and labor.”

As might be expected, the leading expenses for crop and livestock producers were quite different. For crop farmers, cash rents ($26.4 billion), fertilizer/lime/soil conditioners ($23.8 billion) and farm services ($23.5 billion) were the top three big ticket items. On the livestock side producers spent the most on feed ($55.7 billion), related livestock/poultry expenses ($28.8 billion) and farm services ($15.5 billion).

Fuel took a bite out of most farmers’ income. Farmers spent $10.9 billion on diesel fuel – up 4.8 percent from 2012 – and almost $2 billion on liquid propane, an increase of a whopping 25.7 percent. Only gasoline spending ($3 billion) fell, by 3.2 percent.

It’s also not surprising that farmers in the Midwest spent the most in 2013, at $118.5 billion, a nearly $4 billion increase from the previous year. Farmers in the Plains states spent the second most on their operations, at $87.6 billion, followed by farmers in the West ($76.9 billion), Atlantic states ($45.5 billion) and South ($38.8 billion).

By Steve Leer

Google