Dealing with inflation on the farm

Inflation has been a hot topic in the United States for several months. Although it affects everyone, farmers and ranchers experience higher inflation rates than most industries. It’s partly because of America’s great resignation. Many people knew that when baby boomers started to retire, right now an average of 10,000 baby boomers are turning 65 every day, we were going to have a labor shortage. While many companies and the government anticipated this, the COVID-19 pandemic has accelerated retirement rates. This is a factor that contributes to creating higher wages in all sectors of the economy. As the labor market tightens, farmers and ranchers, like other businesses, are forced to raise wages to attract and retain good employees.

The price of oil is another contributor to inflation. Oil prices have risen more than 40% over the past year. The sharp rise in oil prices is attributable to the end of the pandemic and the resulting surge in demand as people work and travel more. In 2020, the lack of commuting reduced the global consumption of gasoline and diesel, so the price fell due to the subsequent drop in demand. On April 20, 2020, oil prices were actually negative for the first time; which means it costs more to store the oil than it is worth. Now the economic rebound, along with the war in Ukraine, has created oil prices over $100 a barrel. How long these conditions will last is unknowable.

Agricultural producers are seeing their input costs skyrocket, fertilizers have jumped significantly. The results of a 2021 study of agricultural fertilizers from the University of Illinois might alarm you. Here are some price comparisons per ton for 2020 to 2021: Anhydrous ammonia increased 53% from $487 to $746 per ton; Diammonium phosphate rose 83% from $390 to $717 per ton; and potash rose 71% from $350 to $600 per tonne. I spoke with a friend who farms about 25 miles north of Topeka, Kansas, and he gave me some real numbers on his farm.

Its anhydrous increased by 250% in one year and the phosphate increased by 95%. His costs for Roundup have gone from $19.70 per gallon to $57.00 per gallon year after year. Its costs for planting soybeans, including seeds and chemicals, have increased by about 33%. Even at the higher prices predicted for this crop year, farmers continue to see their profits go to big business agriculture. The chemical and seed industry is now dominated by just four entities, down from six years ago. These mergers, including Dow and DuPont, reduce producer choice and decrease price competition in the marketplace. As producers, we are captive to these global giants.

Remember that capitalism without competition is exploitation. Big agriculture has relocated its production, mainly to China. These cost and supply chain issues arise when companies worry too much about the cheap costs of producing needed goods that then have to be shipped across the ocean. The more goods are made from the end consumer, the longer it takes for the level of supply to match demand, especially after a three-year trade war with China and a slowdown in demand due to COVID. -19.

As agricultural producers, we need to explain to consumers that rising food prices do not create a financial windfall for family farmers. In fact, it’s quite the opposite. It is frustrating for consumers to hear about rising commodity prices but not realize that rising input costs are hitting family farms harder than most other Americans. Consumers need to understand that without higher food prices, there may be far fewer family farmers to feed them.

The author is the vice president of the National Farmers Organization. He is a cow and calf farmer in Montana.

Comments are closed.