Crop Inputs

Industry drivers

Energy prices volatile

Energy market drivers are dynamic. Prices have fallen due to heightened recession fears, rising inventory levels and increasing energy flows to Europe from multiple countries. Weaker-than-expected growth in China is augmenting these trends. Some price support in the U.S.is coming from greater crude oil exports to Europe, reduced refinery capacity (some facilities are catching up on deferred maintenance) and reduced outflows from the Strategic Petroleum Reserve. Investors do not expect crude oil prices to rise significantly in 2023as indicated by prices in the futures market.  

Crude Oil and Diesel Prices 

Source: Energy Information Agency.

Fertilizers prices down

Global fertilizer stocks remain elevated and demand is down due to extended drought conditions in the interior U.S. Buyers are sitting on the sidelines and/or utilizing short-term contracts until prices find a floor. Falling natural gas prices have reduced production costs for nitrogen. Prices may start increasing after mid-April as most expect the industry to rebuild inventories ahead of the summer and several fertilizer manufacturers will reduce production to catch up on deferred maintenance.

Transportation costs falling

Trucking rates have fallen due to lower goods demand and fuel costs, as well as shifting intermodal mixes (types of trucks utilized). Truckload capacity has started declining and many expect this to continue if the economy weakens. Lower capacity may provide some support to prices.

U.S. Advanced Retail Sales and Inferred Trucking Costs, adjusted for Inflation

Source: Census Bureau, Cass Freight Index. Amounts adjusted using Consumer Price Index.

Container shipping rates are falling due to excess capacity. New vessels are entering the market at an increasing rate during a time when global goods demand is falling. In contrast, dry bulk shipping rates jumped in March due to increasing demand for iron ore by China. This comes off of recent lows not seen since the start of the COVID-19 pandemic. China announced plans to cut steel production and many expect this to dampen bulk shipping prices later in 2023. Labor talks between West Coast dockworkers and their employers are ongoing. Regional cargo volumes continue to decline due to an elevated risk of a labor strike. The National Retail Federation, the American Trucking Associations and the U.S. Chamber of Commerce have urged the Biden Administration to intervene.

Utilization of H2A labor growing on West Coast

The West Coast agriculture industry is utilizing more foreign workers through the H2A visa program to meet peak seasonal demand requirements. The number of H2A workers increased 500% between 2012 and 2022, with the largest gains in California and Washington. Official data suggests anywhere from a quarter to a third of all agriculture workers on the West Coast are from the H2A program.

Updated H2A policies increase costs and program flexibility

The Department of Labor implemented several policy changes designed to:

• Strengthen worker health and safety protections.
• Reduce exploitive behavior by labor contractors and employers.
• Improve flexibility for joint employment (multiple businesses utilizing the same group of workers) and areas of intended employment (authorized work locations).
• Update prevailing wage calculations.
• Facilitate electronic filing and communications.

While these changes may increase the cost to use H2A labor, they may also improve access for small- to medium-sized businesses and provide flexibility for larger businesses.