Production Costs Rise Faster than Consumer Goods

Inflation has pushed the Consumer Price Index (CPI) another 1.3% higher in June. That means all Americans are paying more for everything right now, agricultural producers included. The Producer Price Index (PPI), which measures the costs of raw goods paid by manufacturers and processors, is also rising – typically, the two indexes do not rise at the same rate.

PPI has risen at a much higher rate than the CPI recently, signalizing a slowdown of investment from producers of goods and also, there is a smaller base of wholesale prices. So how does this translate to the ag industry? Specifically looking at the dairy industry, agricultural economist Andy Novakovic shared in a recent Hoard’s Dairyman DairyLivestream that “It’s a matter of percentage and scale.” Ultimately though, producers will often face steeper production costs than consumers will pay for goods.

Read more on price inflation here.