(CNN) – Jim Jones faces supply chain squeeze at his farm outside of Raleigh, North Carolina, as skyrocketing costs squeeze his profits.
In addition to soaring labor costs, fertilizer and fuel prices have been climbing for months, with no caps in sight. He says his profits are down 10-15% this year and 2022 could be worse.
“It comes straight from the bottom line,” Jones said. “If you double the cost of something, you can’t just double the harvest. “
Inflation may be preparing for the most expensive Thanksgiving in history for American families.
The US Department of Agriculture says the average cost of dinner is up 5%, while the American Farm Bureau Federation says the increase could be as high as 14%. The AFBF’s annual survey shows price increases on most Thanksgiving foods, from potatoes to cranberries, as well as turkeys, approaching record cost.
While USDA data shows some farmers have seen the price they receive for their crops – like wheat – increase in recent months, this is inconsistent in the farming world. The USDA says that many farmers are not currently making more money for their crops. And almost all of them face increasing costs.
“My price stays the same or lower,” Jones said of his sweet potatoes.
The farmers’ tribute
“Farmers are price takers, not policy makers,” said Patty Edelburg, vice president of the National Farmers Union. “People pay a lot more in the stores, but what the farmers get has pretty much stayed the same or has become a lot more volatile… The middleman is really the one making the profit.”
In many cases, Edelburg said, the processors and distributors who get food from the farm to the shelves in stores are the ones who are currently passing their rising costs on to consumers. The USDA has also confirmed this. Many of these companies struggle with their own supply chain issues, with materials and ingredients still stuck on freighters and a shortage of labor and truckers driving wages and costs up.
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According to the American Farm Bureau Federation, most turkey farmers signed Thanksgiving sales contracts in the spring, but are now being squeezed by the same input costs as other farmers.
“The increase we’ve seen in feed costs, fertilizer costs, transportation and gasoline – the farmer is paying for all these increased costs, but he has locked in the price he gets for his turkeys. Said Veronica Nigh, senior economist with the American Farm Bureau Federation.
Increased operating costs
“To some extent, we’re also trying to pay for the uncertainty in the market right now,” said Trey Malone, agricultural economist at Michigan State University. “We are in the midst of a perfect storm of unique events in agricultural production. “
Malone says farmers should prepare for several additional months of higher costs on a wide range of inputs, including pesticides, seeds, fertilizers, fuel and labor. Even farmers who now receive a higher price for their crops, he said, are strained by rising operating costs.
In early November, the Purdue University Farm Economics Barometer, which surveys U.S. farmers, found farmer sentiment weakened for a third consecutive month, reaching its lowest level in the first few months of pandemic, mainly due to rising input prices.
Some farmers stock up on expensive materials in case the suppliers run out of stock. Others wait, hoping the prices will drop.
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Supply chain price hikes, in addition to already rising labor prices in recent years, threaten Matt Alvernaz’s sweet potato farm in California. He says the family farm typically earns over $ 100,000 a year, but this year it could lose between $ 80,000 and $ 120,000. And the costs keep going up.
“We could potentially lose a quarter of a million dollars next year,” Alvernaz said. “We wouldn’t have enough cash to cash in the following year to operate our operating loan.”
Farmers are used to volatility, and Alvernaz and Jones are now looking for ways to adapt, such as downsizing or switching to other crops.
“This will worry you, but I’m not going to let myself down. We will survive, ”Jones said. “We just need to get a fair price for what we are growing. “
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