Inputs, labor and transport are more expensive than a year ago (three factors that will cause increases in agricultural products)

A survey on production costs, which included agricultural producers, exporters and cooperatives that are dedicated to the cultivation of 16 different products throughout the country, reflected that the container crisis has made transportation and a large amount of inputs more expensive, therefore that a price increase cannot be postponed.

But in addition, 91% of agricultural producers expect total production costs to rise even more in 2022 compared to 2021, so 76% of them indicated that prices to their customers will increase next year.

Charles Bland, president of the Chamber of Agro (Camagro), affirms that the cost of inputs such as urea has doubled (100% +); that of herbicides has tripled (300% +); and food for animals, livestock, poultry, and pigs showed increases of 40% to 50% more, while internal transport increased between 50% and 300%, depending on the destination.

“Depending on the type of crop, the inputs vary, as with any product. But, on average, total production costs have increased more than 40%. In addition, at least 9 out of 10 of agricultural producers reported that total production costs, including direct and indirect costs, increased this year and 91% expect the trend to continue next year.

As an immediate consequence, seven out of 10 producers indicated that prices for their customers will increase next year.

The most expensive

The main items in the production cost matrix are labor (51%), agricultural inputs (34%), security (10%), and transportation (5%). However, the data may vary depending on each crop.

On the other hand, an export container to the USA (ocean freight) on average increased 60% and freights to other destinations (Europe and Asia) increased between 5 and 7 times, on average. Because there is a clear relationship between the increase in costs for the agricultural producer and profitability, 41% of respondents responded that they expect a negative impact on financial results and 37% expect to have lower cash flow.

According to businessmen in the sector, the four variables with the greatest impact on production costs are fertilizers (48% of those surveyed); labor (34%); transportation and financing (21%); and security (20%).

But labor and inputs constitute more than 80% of the production costs of these entrepreneurs and the increase in costs is generalized and indirect costs in general have been maintained, with the exception of unforeseen costs.

As a medium-term effect, if the situation does not improve, half of the producers (45%) foresee a reduction in employment.


They request support

Therefore, Camagro executives requested support from the government to face this problem, which includes prioritizing attention to the recovery of the road network, since the deterioration of roads and rural roads or the absence of them increases expenses. .

They also ask to eliminate the Value Added Tax (VAT) on imports of agricultural inputs; Strengthen the registration and control or inspection measures of the sales of agricultural inputs to combat illegal trade, including smuggling and counterfeiting or alteration of products, while progressing with legislation that improves the security and efficiency of the national port system.

Regarding the strategies that the agro-industrial sector will implement to face the impacts, there are investment in technology and innovation; productivity; reduction of non-essential expenses; greater control in the use of inputs and look for raw material alternatives.

Also, look for savings, economies of scale, optimization of resources; improve the sustainable production plan with efficiencies; investment in young plantation areas; diversification; more precision agriculture, vertical integration, new market niches; and increase in product prices.

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