American farmers are under siege. Soaring costs for diesel, fertilizer, equipment and seed are threatening to cripple the farm industry. Consumers see high grocery prices, but most are indifferent to the plight of the men and women who produce the food that ends up on America's kitchen tables.
This year the price of nitrogen fertilizer jumped 53%. Key nutrients used in chemicals ballooned 242%. The doubling of natural gas prices since 2020 raised the cost of nitrogen production. Texas A&M estimates the cost of fertilizer alone has added $128,000 to an average grain farmer's annual costs.
Diesel fuel has skyrocketed 74% in a single year. Diesel fuel powers most farm equipment, including trucks that transport grain. Diesel cost $3.21 a gallon last May. Now diesel tops $5.57 a gallon and mounting. Fuel represents about 20-25% of the cost of grain farmers.
Farm equipment, especially for grain operations, is in short supply. Farmers are delaying purchases into 2023. Tight inventory is driving up prices. As one example, prices for self-propelled combine harvesters rocketed 27%. Large combines can cost as much as $500,000.
Seed prices are increasing at the same time when farmers are reporting scarcities of corn and wheat seed. The average price to plant an acre of grain has risen from $3.75 to $7.50, according to Bloomberg. The price tag for corn seed has jumped $10 just since January.
In a normal year, rising demand for food would prompt farmers to increase planting of crops. Just the opposite is happening because inflation is making it more difficult for farmers to make a profit. The U.S. Department of Agricultural (USDA) predicts a 7.9% decline in farm income this year.
Inflation is rattling the cattle market also. The USDA reports cattle inventory is down 2.3%. Some farmers are thinning their herds, selling heifers and steers because of increased costs for fuel and hay. Prices for a large square of premium hay has spiked from $171 last year to $300 to $350 in some areas.
Hay prices are escalating because farmers are producing less hay because of the inflated cost of fertilizer and diesel fuel to harvest the crop. Droughts also have punched up hay prices. But droughts are an annual issue every hay season in various parts of the country.
The supply of cows and heifers is declining. The total number of cattle headed for feedlots is estimated at 1.81 million, a decrease of 1%. Feedlots are the last stop for cattle before the animals are slaughtered As a result of the shortage, beef and veal imports from foreign countries are 29% higher than last year.
Dairy farmers are not immune from the costs of hay and feed. Costs are spiking because there are 81,000 fewer cows than last year. Even a 1% decline in cow inventory, is critical to the supply of milk and butter. Farmers cannot afford to build their herds. Milk prices are the highest in eight years.
Despite the data, uninformed media and politicians are pointing a finger at farmers, blaming them for the highest food prices in U.S. history. They rant about greedy wholesalers and grocery chains raising prices. The limousine elitists in Washington don't have a clue how their policies are hurting farmers.
The overall food index, a measure of prices for everything from eggs to meat, has increased seventeen consecutive quarters, according to the Bureau of Labor Statistics. The CPI (Consumer Price Index) for food soared 10.1% this May over the same month in 2021. It is the largest ascent in 41 years.
A poll by Morning Consult found that over one-half (51%) of consumers surveyed reported experiencing shortages of groceries and food, a hike of 43% from the same month in 2021. America is beginning to resemble the Soviet Union, where empty grocery store shelves are a fact of everyday life.
The common dominator driving food costs is fuel. There is no way to avoid the issue of oil prices if you are serious about addressing the problem of spiraling food prices. Costs for crop production and the transportation of food to market are rising to unheard of levels. It's about energy stupid.
The Biden Administration has done everything in its power to sabotage the energy industry. Cancelling pipelines. Instituting new restrictions on exploration and permitting. Stopping drilling offshore and in Alaska. Discouraging private institutional investors to pour capital into oil companies.
This is a deliberate, Biden crisis. Don't even mention Putin. If America was energy independent as it was pre-Biden, the Ukraine war would still roil global prices, but the U.S. would be better equipped to soften the impact. Unshackled oil companies could meet demand. Stop blaming Putin.
In 2020, the U.S. was the world's top producer of crude oil and a leader in production technology. Policies encouraging oil production and large investments by private markets provided the draft that led to American dominance in oil output. Today that situation has been turned upside down.
As a result of Biden policies, the diesel fuel crisis is growing worse by the day. Some countries are beginning to ration diesel as nations scramble for the fuel. What happens if U.S. farmers cannot get enough fuel? It is a scary scenario no one wants to entertain. But it is a real and present danger.
The United Nations warned this month that up to 181 million people in 41 countries could be hit by severe food shortages. Surely that couldn't happen here? Perhaps not, but there are many signs that it may be a reality if the current inflationary farm costs do not subside.
Many farmers don't have the financial resources to absorb the surging price increases. A Kansas City Federal Reserve Bank survey found capital spending by farm-borrowers was higher than last year. Delays in farm loan repayments are expected to rise, according to a Fed survey.
Only the corporate and large farm operations will be able to ride out the inflation storm. Smaller farms, which are the backbone of American farming, will suffer financially. Unfortunately, it may prompt many small farmers to exit the industry, leaving a monopoly of corporate agriculture operators.
In many states in the KC Fed region, dramatic increases in fertilizer, chemicals and fuel costs are predicted to reduce crop yields. That means less food no matter how you calculate the situation. If you think the food situation is troubling now, just wait a few months.
A recent Texas A&M Agricultural and Food Policy Center (AFPC) report contained this worrisome line: "Given the farm safety net is not designed to address rapidly rising cost of production, there are growing concerns in the countryside about the need for additional assistance."
The farm safety net refers to USDA programs that supplement the income of farmers and ranchers in times of low farm prices and natural disasters. There can be no debate that the current situation facing farmers is a disaster for them and consumers.
There is a looming food emergency and no one in Washington appears to care. Trillions of dollars are being spent in Washington and not one dollar is being invested in struggling farmers who feed not only Americans but millions around the world. Washington needs a wake up call to dodge yet another crisis.
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