Farmers Aren’t Impervious to Inflation

Fertilizer and Seed Prices Soar

Market observers note you can start from the ground up when it comes to inflation’s impact on US farmers. Seed prices and fertilizer costs are way up, and it’s causing a major drain on profits. Research shows the price of anhydrous ammonia fertilizer has increased over 200% from a year ago, checking in at an all-time high of $1,492 per ton. The rising price of natural gas is a factor here, as it’s a key component in fertilizer production.

Seed prices were similarly up 10% in the most recent quarter, according to crop-seed and pesticide supplier Corteva (CTVA). The company says crop-protection services also cost 6% more than they did 12 months ago. Analysts point out price increases like these that are intended to offset inflation eventually mean consumers end up paying more.

Switching It Up With Soybeans and Wheat

Farmers explain rising fertilizer prices impact the types of crops they choose to grow. Corn for example is resource-intensive and could make less sense for farmers facing diminished profit margins. Crops that generally require less fertilizer may also be preferred for similar reasons.

Analysts note these types of trends have an impact on the market’s overall supply of certain crops in the months to follow. Crops such as wheat and soybeans are less resource-intensive than corn, potentially making them more profitable choices for farmers. Farm Progress estimates acreage dedicated to soybeans will be up 6% this year and outpace corn production for just the second time in US history.

Growing Grocery Store Bills

As farmers’ expenses increase, food production companies face higher wholesale costs, continuing the upward pressure on prices overall. Analysts argue this cycle could continue to cause food-price inflation. Economists maintain that while the supply chain’s slowdown is a factor, the issue runs deeper than that.

For example, corn and soybeans are often used as animal feed for meat companies. Chicken and beef will then cost consumers more at the grocery store, as those prices rise. Some farmers may hold back on new equipment purchases given diminished profits, further hampering production. Inflation continues to prove invasive to many aspects of the world’s economy: including what’s for breakfast, lunch, and dinner.

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