Toward the end of the 20th century farmers and ranchers were increasingly caught in a cost-price squeeze that required them to become savvy marketers as well as producers of agricultural commodities.
Adjacent is a chart that shows the ratio of the Prices Received Index to that of the Prices Paid Index over most of the century. The former is the measure of prices ranchers and growers receive for their products while the latter is the measure of the costs of the inputs necessary to realize saleable commodities. Both indexes are defined by the same base period.
The ratio has had considerable fluctuation over the past hundred years. Commodity prices spiked upward during both World Wars and plunged during the Great Depression. Prices again shot upward during the early 1970's, spurred on by sharply increased world demand. However, when viewed over the entire century, prices farmers receive for their production have gone down when compared to the costs associated with producing agricultural commodities. These comparisons do not reflect the rate at which technology changed the cost of producing commodities over time.
Last modified: 08/11/09