News and Opinion from Sisters, Oregon

Inflation factors

Traditional inflation meant prices rise then retreat. Now consumers see it as high prices stay high. Presidential candidates, be honest about what you can and will do to lower them. Begin by admitting some factors are out of your control.

The Ogallala Aquifer supplies groundwater to Colorado, Kansas, Nebraska, New Mexico, Oklahoma, South Dakota, Texas, and Wyoming. It supports 20 percent of America’s corn, cotton, cattle, and wheat production. It provides 30 percent of all U.S. irrigation water. Since significant groundwater irrigation began in the 1950s, the Ogallala’s average level dropped 16.8 feet.

Levels under the Texas Panhandle dropped 44 feet. Kansas averages dropped 28.2 feet. The Kansas Water Office director summarized the state’s agricultural and municipal water situation: “If we don’t adapt to different behaviors, it will run dry.”

As water supplies drop, some farmers shift to dryland farming. For one Kansas farmer, “This is do or die.” That requires less water and equipment and fewer workers, but produces lower yields. Less irrigation, lower yields, higher prices. A drying climate also increases transportation costs.

Approximately 60 percent of U.S. grain exports are barged down the Mississippi to New Orleans for storage and shipping. A lashed group of 15 barges usually equals the capacity of 1,000 trucks. In 2023 record low river levels meant lighter barge loads and fewer barges in a group. By September costs were up 77 percent over a three-year average.

Something similar is happening at the Panama Canal.

The Canal flows through one of the world’s wettest areas, until it doesn’t. Gatun Lake, created to supply the Canal, is at a record low. Authorities recently reduced traffic by one third, from 36 vessels per day to 24. That increased shipping time and costs that will affect consumer prices. Thinking of escaping price anxieties with a cup of coffee? That’s costing more.

April’s dry weather in Vietnam and record rainfalls in Brazil hurt production. Global coffee futures hit new highs. Supplies were already down, and speculative trading was up. How about ordering hot chocolate instead? February cocoa prices set record levels. The causes: drastic falls in West African production due to an El Niño-type weather event and poor harvests.

Got a beef with politicians about beef? Price data show average costs up 7.7 percent compared to January 2023. Supply and demand are out of balance. At the start of 2024, comparative beef inventory was the lowest since 1951. Ranchers are reducing herds in response to drought, geopolitical uncertainties, and supply costs. Fuel is one cost ranchers, farmers, and everyone else have opinions about.

There’s no oil shortage. There is a cheap oil shortage. As of March, the U.S. produces more crude oil than any country. Ever. In 2020 the U.S. became a net exporter of finished products plus crude oil. Why do we still import crude oil, even at the lowest levels since 1972? Chemistry, refineries, and pipelines. U.S. produced oil is called light sweet. Imported is heavy sour. U.S. refineries were built for heavy sour.

Even if refineries could reconfigure overnight, they’re located far from U.S. oil fields. It’s a corporate call to spend astronomical costs to refit refineries, build pipelines from fields to refineries, or build refineries near fields. If they do, buyers will pay the price.

It’s possible some businesses learned they can keep prices high because consumers complain but keep buying. Fast foodies remember when a burger cost a buck and gripe between bites about current prices. They need someone to blame. A current president is an easy target. That takes pressure off companies that might have to explain how depleted water supplies, lower crop yields, reduced herds, and higher shipping costs mean rising food prices but don’t affect profit margins - or contributions to presidential campaigns.

So, presidential candidate, what’s your anti-inflation plan? Magically recharge aquifers and raise river and canal levels? Move oil fields closer to refineries? Regulate and subsidize companies as China does?

 

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