How the rising Consumer Price Index could affect farmers

by | Jun 16, 2021 | 5 Ag Stories, News

The Consumer Price Index (CPI) shows us the prices consumers are paying at the household level. The CPI has been on the rise for the past year and has reached a thirteen-year high. Households are spending a large percentage of their budget on food or eating in general. So how does this rise impact farmers who are the ones producing the food products?

Audio: Full interview with Curt Covington of AgAmerica

Curt Covington is Senior Director of Institutional Lending at AgAmerica. He talks about the impact this rise could have on farmers. Covington says that the short answer is, ?it depends.? It all comes down to which products we are talking about. However, what may surprise you is that beverages are at the top of the list and take up 6% of the household food budget. That is not factoring in milk.

Beef, poultry, and pork are seeing an increase in costs at the supermarket. According to Covington, it is about a 14% portion of the budget. Milk and Milk products make up about 4% of the food budget for consumers. COVID-19 and the pandemic impacted the food budget for consumers and the prices they pay at retailers. This means many consumers are looking to buy direct from the producers. While this has increased the most in fruits and vegetables, there is still an uptick in meats and dairy. This leads Covington to feel that farmer will weather this current situation.

Covington talks about how farmers can financially prepare for weathering this particular storm. He says carrying a lot of debt on the balance sheet is never good, but now is the time to look at how to get some of it off more quickly. Some debt is okay to be carrying year to year.

Covington says farmers need to look at how to grow the business while still managing the debt. He says that working capital will always be crucial.

For more information on AgAmerica, and the services they offer to producers, visit their website.