Good Times On The Farm

Well maybe.

I've been reading an awful lot lately about how higher prices for ag products is boosting the income of farmers. But this suggests that costs are also skyrocketing, setting the stage for a food inflationary spiral:

Soaring prices for agricultural commodities this year have left the impression that farmers and ranchers are getting rich.

A close examination of the cost side of the ledger reveals that is not the case.

And, when commodity prices drop, there will be no commensurate decline in production input costs, setting the stage for an agricultural inflation trap like the one that created havoc in rural America through the 1980s.

That scenario is suggested by a recent U.S. Department of Agriculture analysis of farm sector income and costs and is corroborated by local input suppliers: sellers of feed, seed, fertilizer, pesticides and chemical fallow, fuel and operating loans.

Remember back when we had the cultural event of the fall of the prairie farmers? We're setting the stage again. As commodity prices rise, farmers plant more (and more get into farming) to reap the higher prices. The greater production causes gluts and falling prices. Yet, production costs remain static causing widespread farming failures and foreclosures. So here we go again!