How inflation is impacting South Bend region, Indiana farmers

Outside Evansville, near the corner of Indiana where it meets with Kentucky and Illinois, Randy Kron farms about 2,200 acres of corn and soybeans. By now the corn is taller than he is, and the green vigor of the bean leaves are beginning to fade as the crop dries out.

He’s been farming for nearly 40 years now. That means Kron remembers the farming crisis of the 1980s — a time when high interest rates sent farm debt soaring. Many families lost their farms.

Agriculture now finds itself on the verge of crisis yet again, as farmers face growing inflation andeven higherstakes.Those that produce much of the nation’s corn and soy, as well as raise its livestock, are used to battling the weather. This growing season, however, they are also battling skyrocketing costs.

“There are always some challenges along the way with weather and such,” said Kron, who also serves as the president of Indiana’s Farm Bureau, an agricultural organization that provides support to Hoosier farmers. “But this year is different, it’s a lot more challenging with the high input costs.”

Kron is not alone. He is one of thousands of farmers across Indiana and the South Bend region who are up against one of their most difficult and costly years in decades.

Is it the worst of times?

“Not the worst but the most challenging (of times), because of the uncertainty and the higher costs,” Lynn Loucks, president of the Elkhart County Farm Bureau, said.

Loucks said the overall cost of planting crops − from fuel to seed to fertilizer − has more than doubled in the past few years. The prices that farmers receive for their products, which are set by the market, have risen, too.

“We’re fortunate with the weather, the yield is going to be good,” Loucks said from his Elkhart farm of corn, soybeans, wheat and hay. “Our prices are decent. We’re going to make money. The question is next year with what’s going on in Ukraine and Europe. It takes natural gas to make nitrogen (for fertilizer). And a lot of nitrogen is made in Europe. They need (natural gas) to keep people warm.”

Wyatt farmer Tom Schlarb sounded a bit less secure about this fall's prices than Loucks. With more than 400 acres of corn and soybeans that are indeed looking good, he hopes prices hold so that he might get $6 to $8 per bushel. But if it drops closer to $4 per bushel, he said, “look out.”

And looking to the next season, he said, farmers have yet to see the upcoming prices for products they use to fertilize their fields.

“The way the economy is and all the world situation, we have no idea what prices we’ll be getting this fall,” Schlarb said, having farmed from age 17 until now, at 81. “It’s just a big gamble. It is every year.”

Kron agrees.

“I have done this for 39 years, farming,” Kron said, “and this is the most expensive crop in my experience.”

The current rate of inflation for the average American is hovering just above 8.2%, according to data from the U.S. Labor Department. Farmers wish they were seeing those numbers.

“Regardless of what the national inflation numbers say, it cost the farmer about 40% more to grow the crop this year” compared to two years ago, said Chad Lee, an agronomy professor at the University of Kentucky.

The price of essentially every aspect of farming — seed, fertilizer, fuel, equipment, etc. — has continued to tick upward, and by startling amounts. Some farmers have seen costs double and triple, and that’s if they can even get the supplies they need.

Already tight supply chains — carried over from pandemic disruptions and extreme weather events — coupled with Russia’s invasion of Ukraine are creating a new sense of uncertainty for farmers.

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“You had uncertainty in your fertilizer supply, you had uncertainty in some of your agrochemical supply, and then you had the uncertainty of the weather,” Lee said. “Farmers are used to dealing with the weather, it was the other things — they’re not used to seeing that.”

All the factors combined are creating the perfect storm — and it's wreaking havoc on the farming economy.

Farmers aren't the only ones forced to dig deeper into their pockets. The ballooning production costs are then trickling down to consumers in the form of higher food prices.

While harvest is just around the corner and the growing season is nearing its end, the struggles farmers are facing may be just beginning. They worry that next year, with production costs expected to remain high, could be even worse.

“I’m actually more concerned about the 2023 year and crop instead of 2022,” Kron said. “We are risking a lot more money than we have most years. You have to love it, otherwise we wouldn’t do it.”

Just keeps adding up

FARMING REQUIRES huge upfront investments: Seed, fertilizer, herbicides, diesel, and equipment are the biggest. “And there have been big increases in all of them,” Lee said.

There’s not a singular reason those costs have shot through the roof. Instead, it’s been one factor after another. The first shock to the system came from a hurricane that knocked out some ports and refineries down south. Then the big one hit when Russia invaded Ukraine: That “sent shockwaves,” Lee said.

That region is a major producer and exporter of fertilizer, especially nitrogen, as well as oil and gas. But as global demand for these products continues to grow, the invasion brought exports to a near standstill at a critical point.

The result was massive spikes in fertilizer and fuel prices.

“Those are pretty large line items when it comes to row crop farming, the two you use the most went up the most,” Kron said. “More dollars are going through the checking account, and what’s left is minimal.”

Last year, Kron said the price of nitrogen was about $480 for a ton. This year, however, he paid upward of $1,520 for the same amount.

Fertilizer prices have spiked before, but not like this. In 2008, prices of nitrogen, phosphorus and potassium had increased between 30% to 90%, according to data from the American Farm Bureau Federation. Now farmers are seeing sticker prices as much as 150% to 300% higher compared to recent years.

In Wyatt, Schlarb notes that the potash that he spreads on his field − just one element of fertilizing − has risen in price from $350 per ton three years ago to about $900 per ton.

Diesel is also a major driver of farm costs, Loucks pointed out in Elkhart. The semis and trains that deliver any product are all fueled by diesel, and its price at the pump has been lingering well above that of gasoline.

“Diesel fuel powers the nation,” he said.

Last year, Indiana beef farmer Jim Trietsch and his sons spent about $50,000 on diesel for his farm north of Indianapolis. They travel a lot to lay eyes on all their 17 pastures across four counties every single day. But this year those costs have more than doubled, he said.

“Just imagine trying to come up with just the extra fuel money,” said Trietsch, who has a few hundred cattle across those pastures. “I’ve got to come up with an extra $50,000 out-of-pocket to pay for fuel this year that we normally don’t have to.”

Tag onto that the fertilizer costs, seed costs, herbicide costs and more. Derrick Mote runs Mote Farm Services, which sells supplies to area farmers around Union City, Ind. north of Richmond on the border of Indiana and Ohio.

His father and uncle started the business in the 1950s and Mote began working with them nearly 50 years ago. He said this year has been the most stressful he’s seen in the business, both for farmers and his own company.

“It isn’t just one item, you throw everything in and it just keeps adding up,” he said. Take potassium, he said. If that’s up $60 an acre on 100 acres, that’s about $6,000 more than last year. “This is one product," he said. "And that’s just for 100 acres.”

Dave Kress is experiencing the pinch first hand. The Ohio crop farmer just north of Dayton said he used to grow corn for around $350 an acre. Now that’s close to $600, if not a little more. Kress and his family farm around 1,400 acres of corn and soy in the area, so the added cost is a real burden.

“There’s $600 an acre sitting there,” said Kress, gesturing to the stalks rustling in the breeze just feet from where he’s standing. “That’s the game we play. But as things keep going up like this, it’s just harder and harder to play.”

These increases are hurting more than just crop farmers. Loucks, in Elkhart, said livestock farmers already deal with the usual, added risk of losses when animals become ill or die, and that complicates what they expect to profit. He used to raise a herd of cattle until he sold them off recently.

Now farmers like Greg Gunthorp, who raise pigs and other animals in northeast Indiana, have seen the cost of their feed jump. It makes sense, because much of the food that livestock eat is made from corn and soy. Gunthorp said his feed bill on the farm increased by over $3,000 per week this year.

“This volatility and uncertainty is like you put it on steroids, it’s at a whole different level,” he said. “You just wonder about what you are going to wake up to tomorrow: What can you no longer get? Have the prices skyrocketed more? What’s the next thing it’s going to be?”

Cutting costs wherever possible

THE RISING COSTS aren’t just adding stress, they're also changing the way farmers are doing their job and working the fields.

The price of fuel is compelling farmers to figure out how to make the fewest number of tractor trips across the ground or possibly visiting their fields less frequently.

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Many farmers this year, including Kron and Trietsch, have cut back on fertilizer and nutrient applications. Normally when the Noblesville cattle farmer takes his hay off the ground, he puts fertilizer back on to provide nutrients for the next crop of hay.

“But because of the cost right now," Trietsch said, "we’re not even doing that.”

Instead, many farmers are doing only what they consider maintenance and are skipping steps to build soil health. Others are considering different types of fertilizer, such as manure.

Aaron Chalfant is a crop and livestock farmer in east central Indiana who has thousands of hogs. He and his family started a new business to apply the millions of gallons of manure produced on the farm as fertilizer on other fields.

The costis less than that of commercial chemical fertilizer, and Chalfant said he has seen increased interest in the last year. That includes farmers who previously didn’t want to smell manure on their farm.

“Now they are coming to us,” Chalfant said. “We’re putting manure on ground that we never thought we would.”

Farmers are also trying to cut back on the fight against weeds and bugs. Mote said they are trying to find any place they can save in hopes of still making a profit.

Even if farmers want to apply herbicides or pesticides, they face issues with getting the right ones. Each field requires different types of chemicals, Mote said, depending on the pests, crops, soils, and other factors.

“We had to change a lot of products that we wanted to use,” Mote said. “We had planned on using certain products on their fields, and we had it ordered and paid for and we were ready to roll. And then all of a sudden, the company called and said, ‘You’re not going to get it.’”

Supply problems also extend to equipment and tractor parts. It used to be that farmers could get the parts they needed the next day. Now, it’s weeks or months.

“Farmers don’t have three weeks,” Gunthorp said. “They’ll have missed their window to apply or do something they need.”

That’s exactly what happened with Trietsch on his farm. His main tractor broke down earlier in the season and was supposed to be fixed within a couple days — but it “ended up taking 45 days to get the parts and get fixed, and the cost skyrocketed.”

The delay put him “way behind” on bailing hay and they ended up with only about half the amount they usually have at this time of year. That means another expense to buy more hay, which also costs more this year.

Likewise, many farmers hope that they can avoid the expense of replacing tractors and implements since machinery prices have risen, as they have for automobiles. If it isn’t on a dealer’s lot, Loucks said in Elkhart, there’s a waiting list.

Likewise, many farmers hope that they can avoid the expense of replacing tractors and implements since machinery prices have risen, as they have for automobiles. If it isn’t on a dealer’s lot, Loucks said, there’s a waiting list.

“I’m old enough and my machinery that I can limp along and replace parts,” the 68-year-old, who’s been farming since he was 10, said.

Whether equipment delays, herbicide substitutions or fertilizer cuts, all these changes can hurt crop yield, farmers said. It creates a ripple effect: A lower yield means farmers will get a lower payout and be less able to pay back this year’s higher input costs.

“If you don't have a good foundation down for your crops, you can have a problem quickly. It takes a period of years to build soil fertility back up,” Mote said. “I have a little saying. Every time you go cheap, you’re going to pay in the long-run. To stay profitable, you’ve got to spend.”

Squeezing farmers out 

SOME FARMERS don’t have the extra money to spend to turn a profit.

Farmers have to outlay massive amounts of money at the beginning of the season to pay for everything. They often do that with profits carried over from the past year and massive bank loans — these loans can be in millions of dollars.

They spend all this money, hoping for a good yield, without knowing how much they’ll get paid at the end of the year.

“If you are a row crop farmer, you kind of get one paycheck a year,” said Kron, a farmer and the Indiana Farm Bureau president. “You put seed in the ground and say a prayer.”

But if yields are dropping and costs are rising, it becomes a question of whether farmers will make enough money to pay everything back.

The problem is that while farmers are facing increased prices, they don’t get to choose how much to sell their corn or soy for. Rather, a commodities market based out of Chicago makes those decisions — and farmers just hope it helps cover the costs.

Commodity prices at the beginning of the season were at a strong level for farmers, but have been trending down in recent weeks.

Some farmers such as Trietsch and Gunthorp, who sell their meat directly to consumers and restaurants, have more control in the prices they set for their items. Still, they said they’ve only minimally increased their prices, not wanting to risk losing clients.

“We are taking a smaller margin,” Gunthorp said. “We’re probably playing economic suicide, but I don’t know what other choice we have.”

The growing challenges can squeeze out some farmers, Kron said, particularly some of the smaller ones. Land prices are also through the roof, just as home prices have been across the country. Land that used to be between $5,000 to $7,000 is now upwards of $12,000.

That means farmers like Trietsch, who wants to grow his farm and needs more space for pastures, are struggling to find and afford land.

“You’re pulling it from savings accounts, you might be pulling it from retirement accounts,” Trietsch said. “But you gotta make ends meet and you’ve got to get through so you can continue going.”

These high prices also present a serious obstacle for younger generations to get into farming. When they see the high prices, the stress, the difficulty of finding land and the “reward” at the end of the year, it’s challenging for them to want to come back to the farm.

And for those that do, it’s just too expensive right now, Kress said. He has two young sons, one in high school and the other in college. Both want to get into farming. Kress and his wife have always imagined passing it on to them, even passing on vacations and eating cereal to make sure the farm was a success.

“I would love to bring my sons into this operation, but the cost of farming is a barrier to entry,” he said. “The cost is so huge now that we can’t bring them in.”

Have to stay optimistic

THAT HUGE COST increases are not just impacting farmers, they are trickling down to grocery store shelves and restaurant menus.

Tortilla chips and popcorn come from corn grown in the region. Soybeans are made into oil that’s used in many products. And both corn and soy are used to feed chickens, pigs and cows.

Lee with the University of Kentucky said agriculture touches everything: “Obviously from the food standpoint, right? If you’re eating, you’re eating something that most likely was an agricultural product” with at least one component grown in the Midwest and Corn Belt.

“It’s gotten a lot more expensive to grow," Lee said. "It’s gotten incrementally more expensive for us to consume.”

Food prices have increased roughly 11% from this August to the same time last year, according to information from the U.S. Bureau of Labor Statistics.

While consumers are paying more, little of that money is making it back to farmers. Only about 14 cents of every retail dollar spent on food ends up in farmers' pockets, according to the U.S. Department of Agriculture Economic Research Service. The rest of the money goes to off-farm costs such as marketing, processing, distributing and retailing.

That amount going to farmers has declined by more than half since 1980, while their costs continue to rise. Many in the agricultural industry feel there is a disconnect between farmers and the public.

“I just don’t think they understand the whole impact of agriculture, what it means to communities or people,” Mote said. “We got to have these farmers. We need them.”

While this year has been difficult, many farmers are even more concerned about next year. Production costs are expected to remain high into 2023 while prices for the crops are trending down. Weather this year also has crop yields looking not as strong as the last couple years.

Kress from Ohio said he thinks his family will just break even this year, having been able to carry over some supplies from the previous year and buy the rest early.

“But next year, I can’t honestly tell you on that,” he said. “I’m starting to buy a lot of the inputs, but it’s not looking real good to break even next year — no.”

That worry is clear in the Ag Barometer from Purdue University. Rising costs and uncertainty continue to weigh on farmer sentiment: Expectations for the future were at their lowest level in more than five years. The summer report also showed more than half of respondents expected their farms to be worse off financially a year from now, the most negative response since the barometer began in 2015.

Farmers know agriculture comes with its ups and downs, but many plow ahead because they love what they do. They just have to find a way to get through.

“We are risking a lot more money than we have most years, but you wouldn’t put all that money in the ground and hope if you weren’t optimistic,” Kron said. “There has been a lot of stress this year and a higher cost, but it has to be in your DNA.”

This story is a collaboration between the Indianapolis Star and USA TODAY for the purpose of producing the third episode in the series “States of America.” The full episode of “States of America” exploring the farming crisis will premiere at 8 p.m. and 10 p.m. EDT September 30 on USA TODAY NETWORK’s streaming channel. For a full list of platforms offering our FREE streaming channel, follow the link here.

Call IndyStar reporter Sarah Bowman at 317-444-6129 or email at sarah.bowman@indystar.com. Follow her on Twitter and Facebook: @IndyStarSarah. Connect with IndyStar’s environmental reporters: Join The Scrub on Facebook.

IndyStar's environmental reporting project is made possible through the generous support of the nonprofit Nina Mason Pulliam Charitable Trust.

South Bend Tribune staff writer Joseph Dits contributed to this story. Reach him at jdits@sbtinfo.com.

This article originally appeared on South Bend Tribune: Agricultural inflation: Stakes higher than ever for Indiana farmers