Farm Inflation

Farm Inflation

David Sparks Ph.D.
David Sparks Ph.D.
Right after 2021 began, the Agriculture Department's chief economist, Seth Meyer, projected that farm income this year would drop from 2020, but happily for everybody, he was wrong. Maybe I was being a little overly cautious at the beginning of the year. After all, government payments to farmers were set to be cut by over 40 percent this year. But demand for AG products has been very strong, pushing most commodity prices up and net farm income up 23 percent from 2020. Now for 2022, Meyer is telling producers :We might ease off of what have been pretty good prices, so expect a little bit of a softening on cash receipts. And he says to expect costs for fertilizers, fuel and other inputs to continue very high, eating away at margins. However, because 2021 has been so profitable: You’re in a good position to weather what are going to be those increasing input costs in the new year. Ringing the fire alarm, I'm just saying, keep an eye on things because this was quite a good year and I'd be happy to be wrong in the same way next year. I'd be happy to be wrong and say, margins will be a little bit tighter next year and be totally wrong and have a great farm income year and just blow the doors off again. But I also want folks to be prepared. I think the sector as a whole is prepared quite well in terms of debt to asset ratios and the health of the overall farm economy. I do worry a little bit about this late season run on input prices.
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