If you are a farmer, you know that you are not making that much financial headway, even with current crop prices. Many of us have focused on the parity index over the years, but some of that information comes from the calculations of prices received and paid by farmers, so we decided to make sense of our findings from USDA's May 2008 Index of Prices Received and Paid by Farmers.
Below is a few numbers we identified from the May report. You will see prices received have increased since the base period of 1990-1992, however farming costs have increased even faster.
To access the full report, click here (PDF format).
Index of Prices Received and Paid by Farmers, U.S. Average (May, 2008, USDA)
With a few selected subcategories - 1990-1992=100
- Prices Received (All farm products) 150
- Food Grains 278
- Feed Grains and Hay 222
- Oil Crops 221
- Livestock and products 132
- Prices Paid* 184
- Fuel 392
- Fertilizer 364
- Seed 275
- Feed 188
*(Commodities and services, interest, taxes, and wage rates)
While the index of prices received has increased by 50 percent since the 1990 to 1992 base year, the index of prices paid has increased by 80 percent. Fuel prices are almost four times what they were then, fertilizer is up over three and a half times and seed is approaching three times the price paid in the 1990 to 1992 period.
Food grains (rice and wheat) prices have experienced the greatest improvement. However, livestock prices have lagged behind and have lost significant ground with increased feed prices. The key point here is that, while farm prices are stronger, the cost of production has increased by an even greater amount. By the way, the parity ratio is only 39 percent!