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Inflation is eating into the fabric of the nation. After rising 8.5 percent in March, prices fell slightly to 8.3 percent in April. While this appears to be good news, the Producer Price Index, a leading indicator of the Consumer Price Index (CPI), rose 11 percent in April. This could mean prices will be higher in May.
Inflation is affecting all segments of the economy. Prices of many items are at all-time highs. Nowhere is inflation more acute than in the agricultural sector, the provider of food to the nation. And this is affecting—and will continue to impact — the supply and price of food.
The plight of agriculture was recently underscored by Secretary of Agriculture Tom Vilsack. In a statement before Congress, he stated, “There are 61,670 farm families in America that are on the brink.” He went on to explain that they were delinquent on their loans, bankrupt, or in foreclosure.
The primary problem facing American farmers is rising input costs — that is, the high costs of items used in production. Two of the most severe are fuel and fertilizer. As this is written, prices of both are at all-time highs.
Rising diesel prices are of great concern. While most people are familiar with high gasoline prices, diesel has left many farmers in shock. Analysts state the diesel market is experiencing its worst crisis since the 1970s. Inventories are at the lowest level in decades. Prices have jumped to an average of $5.56 per gallon nationwide, $6.34 in New England, and $6.46 in California. One year ago, the average price was $3.22. Higher diesel prices are not only imperiling production but also transportation.
In like manner, fertilizer costs — comprising on average 15 percent of production costs — have skyrocketed. Fertilizer is an essential input in agricultural production. Worldwide fertilizer markets were seriously challenged before the war in Ukraine broke out. In response to the invasion, the U.S. government enacted sanctions against Russia, the leading exporter of fertilizer. This created shockwaves in the international supply chain.
In short, scarcity is forcing prices higher. Fertilizer is a global commodity. As a result, some fertilizer prices are reported to be up 300 percent or more from one year earlier.
Part of the spike in food prices relates to production costs of farmers. Rising input costs and scarcity in the future may force many producers to restrict production. And as supply decreases, food prices will continue to rise.
Wayne Curtis, former superintendent of Alabama banks, is a retired Troy University business school dean. Email him at wccurtis39@gmail.com.
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