Rappahannock farmers feel the bite of war and inflation; Costs soar while meat prices lag behind | Promontory forum
The world’s intersecting economic and security crises are sending shockwaves through the formative Piedmontese businesses centered around meadows of haystacks and cattle.
For farmers and food companies, the Russian invasion of Ukraine, US inflation and China’s lockdown of about 40 COVID-19-hit cities have unleashed a tsunami of economic woes. What’s surprising is the speed at which the disruptions have pushed up the prices of almost everything farmers need to stay in business — fertilizers, forage, labor and fuel.
Farmers nervously study the futures markets and manage prices, realizing the numbers can be frightening: The average price of gasoline rose to $4.37 a gallon in April, up from $2.91 a year earlier, according to the Bureau of Labor Statistics jump of about 50%.
Grain fed to livestock rose 34% year-on-year in April 2022, driven by inflation and the war in Ukraine. Added to this is the colder spring weather in much of the US farm belt, which has delayed the planting calendar for soybeans and corn. Fertilizers vary from farm to farm, but a farmer in Woodstock, Virginia, said he was spending 31 cents a pound on potash in the fall of 2020 and 81 cents a pound 14 months later — all before Russia invaded Ukraine, a key supplier of potash fertilizer, which drives up prices further. Mike Sands, who runs Bean Hollow Farm, says the cost of urea, a common form of nitrogen for pastures, rose to $920 a ton last year from $370 a year earlier.
Ironically, the Federal Reserve Board’s drug to the inflationary virus – higher interest rates – raises the cost of another element in the mix – borrowing.
Concerned farmers meet giant meat packers
Ox prices paid to farmers are also increasing, but not nearly as much as supermarket meat prices and not nearly as much as increases in fertilisers, feed and fuel. A local farmer said the price he recently paid for nitrogen-based fertilizer increased by more than 100% compared to last year. The price of his 500-pound bulls rose to $1.76 a pound from $1.40 a year ago — just a 26% increase.
Farmers say four international meatpackers dominate 85% of the beef business and have little bargaining power among the farmers who raise the calves. The meatpacking giants – Tyson Foods Inc., Cargill Inc., JBS USA Holdings, Inc. and National Beef Packing Company LLC – have grown significantly, acquiring dozens of companies in the US and overseas, resulting in a stronghold of four companies, which dominates the market Company that slaughters, cuts and packs meat for sale in supermarkets and restaurants.
The Biden administration expressed concerns about meat industry concentration earlier this year when it requested more funding for the US Department of Agriculture to oversee business practices that could harm ranchers and consumers. The White House said that for every dollar consumers spend on beef today, farmers are bringing in 39 cents, up from 60 cents 50 years ago, while hog farmers see only 19 cents on the dollar. Data from the Department of Agriculture shows that farmers’ percentage of total beef revenue, while fluctuating, is at levels below 2017 levels.
Rappahannock farmer Mike Sands says the cost of urea, a common form of nitrogen for pastures, has increased from $370 a ton last year to $920 today.
Sands, who has previously advised a number of US agribusinesses, says that “the slaughterhouses and processing plants are doing well, but I’m concerned that farmers may be considering a range of 10% to minus 20% net profit levels.” As a small organic farm that sells direct to customers, Bean Hollow is not as dependent on inputs, particularly forage, as mid-sized mainstream farms. And it’s less beholden to the giant meatpackers.
pressure in the food chain
Rappahannock farmer Bill Scoggin gives a glimpse of how cost pressures are setting in. He raises “fodder cows” on Rappahannock grass, and while he doesn’t buy expensive forage, he needs fertilizer to ensure a healthy hay crop. The fertilizer his fields need was $500 a ton in 2020, rising to $1000 last fall due to inflation and COVID-related supply chain issues. Then came Russia’s invasion of Ukraine, which pushed the price up to $1,200 a ton. Rising fuel costs increased tensions.
When Scoggin’s steers reach around 550 pounds, they are usually sold to various buyers who fatten the animals on increasingly expensive grains – derived from corn, wheat and soy. Ukraine, battered by Moscow’s all-out attack, cannot ship much of the grain it has stored and will see a greatly reduced autumn harvest; Russia, also a major grain exporter, is suffering from the international sanctions that followed its invasion. Another blow to grain markets came last week when India, the world’s second-largest wheat supplier, announced it would halt exports to deal with domestic food pressures. The result is a reduced and more uncertain supply of grain – and higher prices.
When the heavier “fed” animals are up for sale for 1200 pounds or more, the meatpacking giants step in. If US farmers are asking higher prices, there are ranches in Mexico and other countries that are likely to offer cheaper steers. That means the farms that fatten the animals for their final sale have little leeway to pay more down the chain for the “feed cows” sold by Rappahannock farmers like Scoggin. “I’m just trying to persevere,” he says. “But if it stays the way it is now, it will drive out every cattle breeder.”
anger at politicians
Farmers are used to being lashed by weather conditions, commodity prices, and animal diseases, few of which they can control. But they boil over when they realize that wrong policies or unnecessary global dependencies are interfering with business terms.
A longtime farmer near Front Royal said his main gripe was with petrol and diesel prices “because fuel affects everything in farming”. He adds: “This is the worst thing I’ve ever seen.”
Farmers say four international meatpackers dominate 85% of the beef business, leaving them little bargaining power.
Local farmers understand that the government doesn’t set gas prices, but they reject the Biden administration’s push to replace fossil fuels that contribute to climate change. Farmers argue that the US should instead boost domestic oil and natural gas production to drive down future prices. Of course, climate change is also hurting farmers through more frequent droughts and floods, but some view these risks as hypothetical, while more expensive feed, fertilizer and fuel are all hitting farmers’ checkbooks today.
China’s strict COVID lockdown policy, which recently affected some 40 industrial cities, only adds to the frustrations. Machine parts “have been held up because of disruptions in the supply chain,” Scoggin says.
The raspberry markets are shattered
The disruptions have hit both food companies and farmers. HB Wood, chief executive of Harris Hollow Foods, a Washington-based broker of industrial fruits, purees and juice concentrates, says costs and uncertainties are mounting. In addition to the inflationary effects, the war shook raspberry markets as Ukraine had produced significant stocks of the fruit and sold them to world markets via Poland. The war crippled Ukrainian raspberries and deprived Polish fruit farms of Ukrainian migrant workers who returned home to help repel the Russian attack.
Meanwhile, higher gasoline and diesel prices have pushed up transportation costs, and wooden pallet prices have skyrocketed. Wood says current stresses have “eliminated just-in-time deliveries” that efficiency-oriented companies once embraced. But the shift to inventory building has created a new problem: a shortage of refrigerated storage. Overall, Wood sighs, “It’s pretty messy.”
By Tim Carrington — For the Foothills Forum
Promontory forum is an independent, community-supported non-profit organization that addresses the need for in-depth research and reporting on Rappahannock County issues.
The group has an agreement with Rappahannock Media, owner of Rappahannock News, to present this series and other award-winning reporting projects. More at foothillsforum.org.
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