This may be one instance that inflation and supply chain issues could work to a farmer’s advantage. The same economic storm that’s driving up equipment, fertilizer, and other input costs has been driving up the price of steel. That also means that scrap metal prices have moved skyward and many dairy farmers across the country could take advantage of the situation by sending old machinery and equipment to the scrapyard.

The value of iron has moved so swiftly that U.S. steel producers are even buying up scrap metal businesses, reported The Wall Street Journal on January 3, 2022.

“New mills make steel by melting scrap or processed iron in electric furnaces, a production process that now accounts for about 70% of the steel made in the U.S.,” wrote Bob Tita of The Wall Street Journal. “It is a lower cost process with reduced carbon emissions compared to making steel from iron ore melted in a coal-heated blast furnace.

“But the process is putting more pressure on the U.S. scrap market,” continued Tita in his article Steelmakers dive into junk business to feed new mills. “Steelmakers’ scrap purchases in 2021 through October were up 17% from the same period a year earlier, according to Metal Strategies, a Pennsylvania-based consulting firm.”

Staying stateside

For many years, processed scrap metal was loaded on containers for shipment to China, Japan, and other Asian ports. Now, due to both domestic demand and cross-ocean shipping issues, more of that metal is staying in North America.

The average spot market for processed scrap metal from the likes of old farm equipment finished last year up 26% when compared to one year earlier. Meanwhile, the price for top-end scrap metal that was discarded immediately after manufacturing rose 34% during the same time window to fetch $540 per ton.

To be certain, farm equipment will not bring that price as it needs to be chopped, shredded, and processed. Call your local metal scrapyard for a price quote. Often, they will even come onsite and pick up metal, too.

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(c) Hoard's Dairyman Intel 2021
January 20, 2022
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