Farmers Face Down Deflation As Tractors Get Rusty

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Farmers are supposed to be frugal and that characteristic may serve them well. After getting fat and happy off high agricultural goods prices, they get to be on the poor end of commodities deflation.

It is just their luck that as they are bringing in record crops, buying extra seed, planting more land, and getting new tractors, that the need for their corn and wheat has fallen.

All those people on the bread lines and poor citizens who need a break on food and gas prices are getting some relief now. Farmers may have to take out more loans, but,on balance, the economy is better off if an ear of corn does not cost $10.

The first knee-jerk reaction from economists is that low food prices are a recipe for deflation. The argument has some benefit, but not as much as keeping people who don’t have any money from going hungry.

Deflation may cut corporate sales and earnings down the road. In theory, that will cause more job losses. No one can be sure. Time will tell. But, in a very bad economy, the distance people are willing to look into the future is not much further than the end of their noses. Anything beyond is simply too bleak.

From that perspective, cheap food looks good.

Douglas A. McIntyre