The Impact of Inflation: 5 Ways Inflation Is Affecting Agriculture in 2022

Inflation is causing havoc all over the globe at the moment, and with the rising cost of living hurting many people’s budgets, you can easily be forgiven for focusing on your personal bubble rather than the wider impact of this crisis.

By understanding what’s going on in the lives of others, however, it can be easier to tweak your lifestyle and purchasing habits to help protect your back pocket. A great place to start is with an overview of how inflation is affecting agriculture.

Equipment and Parts Are Becoming More Expensive

Inflation is currently pushing the price of equipment and parts up.

Though it may seem like someone else’s problem, the flow-on effects can directly impact your budget. For example, as the price of grape harvester parts fluctuates, so too do the prices of fresh grapes and grape products such as wine and sultanas.

Production Is Falling

Another factor that pushes prices up at the supermarket and makes life harder for farmers is that inflation is forcing production to fall. This is due to a collection of factors, including reduced borrowing power, resource shortages (which we’ll discuss further below), and personal issues.

For example, a farmer who can no longer afford to feed themselves and their family will lose productivity, so production will likely dip.

Primary producers may also have to lower production if their machinery breaks and they cannot afford to replace it, as this will lead to an increase in manual processing and handling.

Lower Borrowing Power

Primary producers will also be experiencing the same loss of borrowing power as the rest of us.

As a result, they may need help securing land, livestock, or machinery. While a private buyer simply has to delay their property purchasing plans, the consequences can be far worse for farmers.

Lower borrowing power can negatively impact farming businesses and may even lead to the displacement of families who have been in the agriculture industry for generations.

Resource Shortages Are a Significant Possibility

Inflation also disrupts supply chains. As prices rise and production falls, many parts of the supply chain will likely go through resource shortages. Indeed, we are seeing this already, with stock missing from grocery stores and pharmacies.

The agriculture industry is not exempt from this, with consumables such as fertilizer and feed facing the possibility of shortages.

Lack of feed and fertilizers will have a flow-on effect, causing issues all the way down the chain, driving prices up further, and creating a self-perpetuating inflation cycle.

Profit Margins Are Shrinking

Finally, because the price of everything is rising, but farmers and primary producers are not necessarily receiving higher rates for the products, their profit margins are shrinking.

As profit margins shrink, the agriculture industry will have to cut back on production and possibly even pivot entirely to providing goods that offer better margins.

Unfortunately, this is a challenging process and can lead to more losses for primary producers and further shortages in stores.

As you can see, inflation can have just as big of an impact on the agricultural industry as it does on your back pocket. Unfortunately, like the effect on many other parts of the economy, this can lead to a spiral of inflation that makes things worse for everyone.

Because of this, we must do what we can to support farmers and primary producers, as we’ll only get through the crisis together.