We all know that the commodity price cycle is now affecting agricultural prices. I recently had a long chat with a farmer friend about the agriculture business and he said that, even with rising commodity prices, input costs are rising just as fast.
This means that the cost of diesel fuel alone is eating into his wallet big-time. Heavy equipment prices are rising and so are the costs of repairs and parts. The cost of seed is rising and the cost of fertilizer has skyrocketed, making a field of corn much more expensive to sow. Even the price of hay is going up and it can be difficult to find good quality hay to feed livestock.
So, just because agricultural commodity prices are rising doesn’t mean that family farm incomes are going up much at all. I guess it’s always been this way and that’s why there are fewer family farms every year.
The one thing that you can count on with farmers is that they always have hope for the future and any money they do make goes right back into the local community. This is why I’m bullish on some farm equipment companies.
One company mentioned recently in this column is Titan Machinery, Inc. (NASDAQ/TITN), an equipment dealer consolidator in the Midwest. This newly listed stock is already up several points since I first wrote about it and, although the stock is now pricey, I get a real sense that there’s a lot of institutional interest in this company.
Many people are now saying that the price of a barrel of oil is due for a major correction. In my mind, this couldn’t happen soon enough. This is the one input cost that most of us cannot avoid. Even $100.00 oil would be a big help to farmers and city dwellers alike.