The Farm Economy: Overall Trends
Inflation is starting to show up in many input costs. One of the major areas of cost increases is labor and wage expenses. Average U.S. hourly earnings increased by 3.2 percent during 2018,1 and a tight labor market means that finding and retaining workers has grown more costly.
Another area of rising costs has been energy and related expenses. While crude oil prices have fallen in recent weeks, oil still averaged $65.18/bbl for 2018,2 an increase of 28 percent over 2017. This brought average gasoline prices to their highest level in four years, before declining late in the year. Anecdotal reports indicate that prices for supplies from plastics to cardboard boxes have increased.
Transportation costs (and availability) are a factor as well not just because of fuel costs, but also because of a continuing nationwide driver shortage, and the implementation of electronic driver logs for long-haul truckers, which has driven expenses higher.
Continued tough rhetoric between the US, China, and other nations about trade and tariffs, has had a major impact on the agriculture industry. Many sectors of US agriculture, forestry and commercial fishing are highly dependent on exports. Even for those producers whose products are not directly exported, the price they receive domestically may be heavily influenced by international trade. In addition, prices for some imported goods from China as well as Europe have already started to reflect import tariffs.
1 US Bureau of Labor Statistics
2 U.S. Energy Information Administration, West Texas Intermediate Crude Oil