How the GOP Is Using the Farm Bill to Address Inflation
Inflation shows up on the fertilizer invoice and at the checkout line. Here is how supporters say the farm bill could help, and why economists disagree.
Two different inflation problems
When people talk about inflation and farming, they often mean two things at once. One is what farmers pay: seed, fuel, fertilizer, feed, equipment and interest. The other is what families pay at the grocery store. The two are linked but do not move in lockstep, and a policy that helps one may do little for the other.
The Bureau of Labor Statistics publishes consumer and producer price data, and USDA ERS tracks food prices and the farm share of the food dollar. Use them to check any claim, because the numbers in political speeches are often selective.
It also helps to remember that retail prices include transport, packaging, labor and profit at each step, so even a big move at the farm gate can be a small move at the store.
Because the two are linked loosely, a family can see grocery prices fall while a farmer still faces high input bills, or the reverse. That is why single-number claims should make you suspicious.
What supporters say the farm bill can do
Republican supporters generally argue that the farm bill should reduce the cost of doing business: lighter regulation on inputs, support for domestic production capacity, and a safety net that updates with higher costs. They say a predictable policy environment lowers risk and therefore lowers what lenders charge.
They also argue for removing trade barriers on inputs and for keeping interest costs in check through fiscal restraint, though those lie outside the farm bill itself. Others in the party stress deregulation as the main lever.
- Lower regulatory burden on production
- Support for domestic input capacity
- Updated safety net for higher costs
- Fiscal restraint to ease interest rate pressure
What the farm bill really controls
The farm bill covers commodity programs, crop insurance, conservation, nutrition assistance, credit and research. It does not set interest rates, which belong to the Federal Reserve, or directly set what a bag of seed costs. Its main tools for inflation are indirect: how much risk farmers bear, how much they can borrow, and how well rules fit their costs.
That is a limit worth stating plainly. This farm money guide covers budgeting for rising costs, which is where many farmers have to start while waiting for any policy change.
Keeping a simple record of your cost per acre or per head over several seasons gives you your own inflation index, which is more useful than any national number.
What critics and economists point out
Many economists warn against expecting the farm bill to control inflation. They say prices respond to global energy, weather, exchange rates and monetary policy. Some critics argue that subsidies can push up land rents and input prices, since sellers capture some of the support. Others say targeted nutrition programs ease family budgets directly and should not be cut for the sake of inflation.
Supporters respond that regulation and trade policy do affect input costs, and that high spending can itself feed inflation. Look at the CBO and the FRED economic data site to test each side's claims against actual series.
A fair reading is that both sides have part of the story. Regulation does add costs in some places, and global shocks drive far more of the price swings than any one bill can offset.
How rising costs hit a Panhandle operation
Cattle feeders in the Texas Panhandle watch feed grain prices closely. Irrigated crop farmers watch fuel, power and fertilizer. Dairy owners track feed and labor. When margins tighten, equipment purchases are delayed, which affects dealers and local towns. The farm equipment guide covers the repair-versus-replace question many farmers face.
Lenders such as Farm Credit associations and local banks can discuss how to restructure payments if cash is short. Do that early, not after you fall behind.
Supporters and critics also disagree about timing: a farm bill takes years to write and phase in, so it rarely answers a price spike that is happening now.
Questions to ask about any inflation claim
Ask which price is being addressed, over what period, and what mechanism links the policy to it. Ask whether the claimed saving shows up for the farmer, the processor or the shopper. And ask who is quoted: an economist with data, or a campaign.
Over at farm.FM you can read about the economics of the farm in the agribusiness section, and a story like a farm.FM piece on rising farm costs gives a farmer's view. For your finances, speak to a licensed professional.
For a break from price charts, the country music pages are a good option.
Sources and further reading
- Bureau of Labor Statistics: labor and price data
- USDA Economic Research Service: farm economy data and analysis
- Federal Reserve: U.S. central bank
- Congressional Budget Office: cost estimates for federal programs
- FRED: Federal Reserve economic data
- Farm Credit: cooperative agricultural lending network
Ask locally: Ask your lender or a farm management advisor how rising input costs affect your budget and whether restructuring options make sense.