The cost of food has risen sharply not just in the US but all over the world. Governments are worried that the increases will last longer than expected. Unprecedented global growth has boosted demand for food, which has driven up prices of farm produce from milk to wheat and meat.As world food stocks decline American exports are expected to cross $100 billion, an increase of almost 23%.
The increase in prices of farm based products means that agricultural incomes across America are rising. They are expected to rise by 50% this year over the average of the last ten years. This is increasing rural prosperity not just because of rising incomes, but also because of rising land values.
Besides demand other factors are also at play leading to rising agricultural commodity prices. The Australian wheat crop has been hit by a drought and 18% of feed corn in America is being distilled into ethanol.As the price of corn rises farmers are switching over to growing corn, which reduces production of other crops leading to an increase in their prices. Ethanol production in the US is expected to double in the next five to six years.
The American farmer is better positioned than his counterparts in most other countries as he owns more equipment and storage facilities.This increases his productivity and also enables him to get a better price for his produce.
The only bit of bad news for the moment is that costs have also risen sharply because of the increase in oil prices and the cost of agricultural labor.In fact it is the latter which is causing greater concern. Several areas in the US are heavily dependent on immigrant farm labor, a large part of which is illegal.With politicians talking tough on this issue, these costs may increase sharply in future. For the moment however the US farmer has never had it so good.He doesn't have to try and figure out what he should plant this year. He can plant anything and he won't go wrong.