By: Carl Zulauf, Professor, and Nick Rettig, B.S. Department of Agricultural, Environmental, and Development Economics Ohio State University
The sharp drop in crop prices over the last 2 years has focused attention on farm input prices. In particular, how closely do farm input prices follow crop prices? To put this question in historical perspective, this article looks at various aspects of the dynamics of U.S. farm input prices since 1981. Findings include that, after adjusting for general price inflation, not all farm input prices have increased, that farm input prices do adjust with crop prices, that the adjustment varies by input but is a lag process that becomes larger over time, and that, on average across the inputs examined in this article, the adjustment process appears to reach closure after approximately 5 years. To download the full pdf document Click Here.