During the last year or so, inflation has made the weekly trip to the supermarket an experience in unpleasant surprise, as prices for most goods have been going up on a regular basis — sometimes dramatically. A majority of humans living today have never experienced significant inflation in their adult lives, and seeing prices for basic goods constantly rising creates a deep feeling of anxiety and unease.
For farmers, though, a trip to the grocery right now creates something closer to outrage. We are certainly well aware of inflation: we experience it on a daily basis when purchasing all the goods and services required to grow food. Fuel, payroll, fertilizer, seed and just about everything else we buy has jumped in price this year. Meanwhile, interest rates on the loans that farmers use to finance their operations each year have jumped as well. But the price of most crops has not increased, and in some cases has decreased. We are borrowing more money and paying more interest to grow the same amount of food, but are receiving less income.
At this point, the average food shopper might reply “That’s not true. I paid twice as much for (fill-in-the-blank food product) last week that I did last September. The price of food has gone way up”. And that statement is also true: retail food prices are up dramatically in 2022.
The problem is that many farmers are not receiving any of that increase. So-called “Farmgate Prices” paid to growers for many of the crops grown in California are the same they were in 2021, and some are actually lower. Retailers and distributors are seeing higher margins. They may use some of it to cover their costs, which have also increased, but not all of it.
Now the value of the dollar is rising vis a vis other currencies. That will make crops exported from the U.S. more expensive abroad. It will also encourage other countries to sell more of the food they grow to the U.S., as it will fetch a higher price. The U.S. domestic market will be flooded both with domestic farm goods that would normally be exported as well as with cheap imports. Retailers and distributors will take advantage of these to lower the prices they offer to domestic farmers even further while charging the same amount at retail and pocketing the difference. It’s not an overstatement to say there is a major crisis coming to the farm economy in California, which specializes in “high value” crops rather than staple commodities like corn and wheat.
In the beginning of 2022, we made a decision at Terra Firma not to raise the price of our CSA subscription. Our hope was that inflation might indeed prove to be “transitory” as predicted by the Federal Reserve. Unfortunately that prediction was wrong, and the price of goods kept going up. We also experienced a number of climate-change related crop losses this year. As the end of 2022 approaches, it is pretty clear we will be seeing a net loss. Luckily, we keep funds in reserve to help us weather a bad year like this one.
For subscribers, our CSA is a good way to fight inflation and save money by encouraging cooking and eating at home. But it’s unsustainable for us to continue to charge the same amount for your boxes now than we did in 2021. Over the next few months, we’ll be crunching the numbers to see how the year shook out, but we will likely have to raise our prices for 2023. If you have any thoughts or feedback on that, please drop us a line.
Thanks,