Jim Jones is facing a supply chain squeeze on his farm outside Raleigh, North Carolina, as skyrocketing costs slice through his profits.
On top of spiking labor costs, the prices of fertilizer and fuel have been climbing for months, with no ceiling in sight. He says his profits are down 10% to 15% this year, and 2022 could be worse.
“It comes right off the bottom line,” Jones said. “If you double the cost of something, you can’t just double the crop.”
Inflation may be cooking up the most expensive Thanksgiving in history for American families.
The US Department of Agriculture says the average dinner cost is up 5%, while the American Farm Bureau Federation claims that the increase may be as high as 14%. The AFBF’s annual survey shows price hikes on most Thanksgiving food, from potatoes to cranberries, as well as turkeys, which are nearing a record high cost.
While USDA data shows some farmers have seen the price they receive for their crops – like wheat – increase in recent months, it’s not consistent across the agriculture world. The USDA says many farmers aren’t currently making more money for their crops. And almost all are dealing with rising costs.
“My price is staying the same, or lower,” Jones said about his sweet potatoes.
The toll on farmers
“Farmers are price takers, not price makers,” said Patty Edelburg, vice president of the National Farmers Union. “People are paying a lot more in the stores, but what the farmers are getting has pretty much stayed the same or gone much more volatile … The middleman is really the one making the profit on this.”
In many cases, Edelburg said, processors and distributors who get food from the farm to store shelves are the ones currently passing along their surging costs to consumers. The USDA confirmed this as well. Many of those companies are dealing with their own supply chain problems, with materials and ingredients still stuck on cargo ships and a shortage of labor and truckers driving up wages and costs.
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Most turkey farmers, according to the American Farm Bureau Federation, signed sales contracts for this Thanksgiving in the spring but are now getting squeezed by the same input costs as other farmers.
“The increase that we’ve seen in feed costs, fertilizer costs, transportation and gasoline – the farmer is paying all those increased costs, but they locked in the price they’re receiving for their turkeys,” said Veronica Nigh, senior economist at the American Farm Bureau Federation.
Rising operating costs
“To some extent, we’re also trying to pay for the uncertainty in the marketplace right now,” said Trey Malone, an agricultural economist at Michigan State University. “We’re in the middle of a perfect storm of unique events in agricultural production.”
Malone says farmers should prepare for several more months of higher costs on a huge range of inputs, including pesticides, seed, fertilizer, fuel and labor. Even farmers now receiving a higher price for their crops, he said, are being stretched by the rising operating costs.
In early November, Purdue University’s Ag Economy Barometer, which surveys American farmers, found farmer sentiment weakened for a third straight month, hitting its lowest level since the early months of the pandemic, driven largely by the rising input prices.
Some farmers are stocking up on expensive materials in case suppliers run out. Others are waiting, hoping the prices drop.
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The supply chain price hikes, on top of already rising labor prices in recent years, are threatening Matt Alvernaz’s California sweet potato farm. He says the family farm typically profits more than $100,000 annually, but this year it could lose between $80,000 and $120,000. And the costs are only getting higher.
“We could potentially lose a quarter million dollars next year,” Alvernaz said. “We would not have enough cash to take into the following year, in order to get our operating loan to operate.”
Farmers are used to volatility, and both Alvernaz and Jones are now looking for ways to adapt, like downsizing or shifting to other crops.
“It’s going to worry you, but I’m not going to let it get me down. We will survive,” Jones said. “We just need to get a fair price for what we’re growing.”