A survey from Purdue University says farmers remain uneasy regarding inflation and future costs. The Ag Economy Barometer surveyed 400 farmers in August, with 51% saying they expect their farms to be worse off financially a year from now.
Michael Langemeier, a professor of agricultural economics at Purdue, said a major factor to farmers’ worries was that inflation affects production agriculture more than consumer goods. “Looking at the PCE, which is one of the common measures used to measure inflation, that was running right at 6.3%,” he said. “If you look at all production items used by farmers and ranchers, that rate is actually 15.1%.”
According to Langemeier, things like fertilizer have their own supply-and-demand factors. “When energy prices went up and corn prices went up, it's not that surprising to see an increase in fertilizer,” he said. “It's surprising to see as large as it was, but certainly, it's not that surprising to see an increase.”
Another contributing factor was the fear of input prices, which include fuel, staying high for the foreseeable future. “What producers are really worried about is these input costs stay relatively high, and then the crop prices come down, you got your classic margin squeeze,” Langemeier said.
Whether consumers could see prices at the grocery store affected is complicated.
“Some products produced in production agriculture have a more direct link to food (prices), for example, you take your livestock products, they have a more direct link,” he said.
Corn and soybeans can affect prices more indirectly due to their multiple uses in things like ethanol or feed for livestock. As Langemeier put it, “when you see an increase in corn and soybean prices, like we've seen, that translates into higher feed costs, which raises the cost of production for all livestock and egg production.”
Langemeier said the news isn’t all bad. Seed and wages have managed to inflate at a more manageable rate compared to other input factors.
