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Input Price Indices

Massachusetts Agricultural Census 2012

Figure 8.1 shows the prices received index for all farm products and the prices paid index for all farm inputs from 1979 to 2010. Prices received by farmers in the U.S. increased almost one and a half times, from an index value of 94 in 1979 to 139 in 2010 (the indexes have a common base year where 1977=100). Such increases in prices received seem to paint a good picture for U.S. agriculture; however, comparing the prices received index to the prices paid index tells a different story. The index of prices farmers paid for their inputs increased threefold from a value of 66 in 1979 to 183 in 2010. Prices received by farmers were higher than those paid by farmers from 1979 until 1991, after which prices paid surpassed prices received. Since 1991, prices paid and prices received indexes have continued to diverge at a steady rate. In order for farmers to continue to operate, cost saving technologies need to be adopted to improve productivity allowing farmer to produce more using fewer inputs.