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Wednesday, May 14, 2008

Farm cost increases outpace those of food prices

Soaring food prices, especially foundational foods such as barley, milk, corn and rice, are invoking concern worldwide. However, farmers are not racing out to plant more of these crops in hopes of cashing in on the higher prices.

Jerry Hirsch writes in The Los Angeles Times that "farmers are planting cheaper-to-grow wheat and soy" because "the cost of planing some crops in rising as fast as their prices, and sometimes faster, leaving little incentive to increase production of some foods that remain in high demand around the world."

According to Wells Fargo & Co., it costs a farmer approximately 47 percent more to farm an acre of corn this year compared to last year, but the price of corn has increased only 35 percent during the same time frame. Chad Hart, an agricultural economist at Iowa State University, told the Times, "'The price of crops drove what farmers did last year,' now 'it's costs, and that's prompting farmers to reevaluate how they allocate their land this year."'

The Times article notes "one problem for all farmers: the rising cost of fertilizer, which has nearly doubled in the last year, according to the Department of Agriculture." This increase in fertilizer costs has yet to be offset by increases in produce prices. Jim Prevor, editor of Produce Business magazine, recently told The Associated Press that "some produce prices are already beginning to creep up due to fertilizer and other costs, but major increases won't be seen until farmers curtail crops that become too expensive to grow." Farmers are affected by an assortment of other increased costs, including shipping expenses, diesel fuel, seed prices, and higher rents, that has resulted in cutbacks and alterations to farming methods or crops planted.

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