Farmers seeing higher rates of inflation than others
Inflation has been a hot topic in the U.S. for the past few months. While it affects everyone, farmers and ranchers are seeing higher rates of inflation than most industries. Some of this is because of America’s great resignation. Many people knew that as baby boomers started to retire, right now an average of 10,000 boomers reach 65 every day, we were going to have a labor shortage.
While many businesses and the government were planning for this, the COVID-19 pandemic has sped up retirement rates. This is one factor helping to create rising wages across all sectors of the economy. As the labor market tightens, farmers and ranchers, like other businesses, are forced to raise their wages to attract and keep good employees.
The price of oil is another inflation contributor. Oil prices have risen by more than 40 percent in the past year. The sharp increase in barrel oil rates is attributable to the pandemic winding down, and the resulting spike in demand as people work and travel more. In 2020, the lack of commuter travel cut world consumption of gasoline and diesel, thus the price plummeted because of subsequent falling demand. On April 20, 2020, oil prices were actually negative for the first time; meaning it cost more to store the oil than what it was worth. Now, the economic rebound, along with the war in the Ukraine, has created oil prices of more than $100 a barrel. How long these conditions will last is unknowable.
Agricultural producers are seeing their input costs skyrocket, fertilizer has jumped significantly. The results of a 2021 study focusing on farm fertilizer from the University of Illinois may alarm you. Here are a few prices per ton comparisons for 2020 to 2021: Anhydrous ammonia increased 53 percent from $487 to $746 per ton; Diammonium Phosphate increased 83 percent from $390 to $717 per ton; and potash increased 71 percent from $350 to $600 per ton. I spoke with a friend who farms about 25 miles north of Topeka, Kansas, and he gave me some real-life numbers from his farm.
His anhydrous increased 250 percent in one year and phosphate went up 95 percent. His costs for Roundup went from $19.70 per gallon to $57 per gallon, year over year. His costs to plant soybeans, including seed and chemicals, increased about 33 percent. Even at the higher prices predicted for this crop year, farmers are still watching their profits go to big ag companies. The chemical and seed industry is now dominated by only four entities, which is down from six years ago. These mergers, including Dow and DuPont, reduce producer choice and lowers pricing competition in the marketplace. We, as producers, are held captive by these global behemoths.
Remember, capitalism without competition is exploitation. Big agriculture has been moving production off shore, mainly to China. These cost and supply chain issues occur when corporations worry too much about cheap production costs of necessary goods which then have to be shipped across the ocean. The fArther away goods are made from the end consumer, the more time it takes to bring the level of supply up to match demand, especially after a three-year trade war with China and a slowdown in demand from COVID-19.
As agricultural producers, we need to explain to consumers that increasing food prices are not creating a financial bonanza for family farmers. In fact, it is quite the opposite. It is frustrating for consumers to hear about higher commodity prices but not realizing our input cost inflation is hitting family farms harder than most other Americans. Consumers should understand that without higher food prices, there may be a lot fewer family farmers to feed them.