Increasing Expenses More of a Challenge This Year BY JOHN MILLER
O
ver the past two years we have all noticed the rising cost of just about everything we use in daily living. It is absolutely the case that over the past couple of years Covid related issues across the globe have played a huge role in market disruptions. The nature of this disease led governments around the world to be very proactive to prevent further spread. Government led sanctions on travel and commerce sent shockwaves through most commodity and equity markets. In addition, the civilian population has been required to make personal decisions about how to live out daily life with less risk to catching this disease, and for many this includes cutting out travel and face-to-face commerce. Merely the chance for further spread of Covid related sanctions or impact on the civilian mindset about how to carry out daily life has created extreme price volatility in the marketplace.
most closely with the highest inflationary areas across Europe which in this case are Eastern European countries. One could spend pages debating all the causes and possible cures for our current inflation and include topics like national debt, trade policies, federal reserve monetary policy, taxation and regulatory measures and the like. The bottom line however is the fact that prolonged inflation coupled with the uncertainty of commodity prices add tremendous risk to farming. And at this time US agriculture, while experiencing better than average prices for their products as illustrated by Figure 3 which is the corn futures price for next summer, is struggling under the weight of rapidly rising input costs. This is nowhere being more revealed than in fertilizer products which are so vital to crop productivity and can comprise anywhere from a quarter to a third of the annual budget.
One measure of the economy that affects us all is the consumer price index charted in Figure 1 below. I don’t have to mention that prices for just about all consumer goods has gone up, and many are very limited in supply. Try buying a new vehicle to drive, or some common food items. Figure 1 goes back to the early 1970’s, and you can clearly see how our current situation is starting to resemble the much-remembered inflation of the late 1970’s. Something to keep in mind is that the high inflationary period of the late 1970’s was followed by a recession that was strongly felt across Texas since this was very painful period for the oilfield.
For a closer look at the US inflationary situation see Figure 2 which shows how we compare to Europe. It may surprise you that it is the middle US that has the highest inflation here at home and compares
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Ag Mag THEAGMAG.ORG
Over the past year, the increasingly tight supplies and rising prices of fertilizer has been related to North American production problems, largely related to Hurricane Ida that hit the MS delta so hard, the skyrocketing natural gas prices in Europe that all but halted production there, and Chinese and Russian government policies limiting exports from the world’s main suppliers. Across Europe, natural gas values over the past few months have risen from less than ten dollars risen from less than ten dollars per mmbtu to over 40. This has been a game changer for nitrogen production since natural gas is a major price component. The extreme val-
