Episode summary
The Inflation Warning Coming From America’s Farms
Wall Street Week
· · 11 min · Guests: Austan Goolsbee
Summary
Chicago Fed President Austan Goolsbee traveled to rural Illinois to hear how farmers are experiencing the economy before those pressures fully show up in national data. The visit highlighted a split between crop prices and input costs: farmers said soybean and corn prices have been weak, while diesel, fertilizer, shipping and other expenses have stayed high. That combination, they argued, has squeezed profitability even when harvest conditions improve.
Goolsbee used the trip to explain why the Fed’s regional structure matters. He said conversations with local businesses can reveal trends earlier than the data and help the central bank judge whether inflationary pressures are temporary or persistent. He also said supply shocks can be harder to handle than demand-driven inflation, because rate hikes do not directly solve higher fuel or fertilizer costs.
The discussion pointed to a broader policy tension: if these shocks fade, the Fed can wait; if they prove durable, Goolsbee said the Fed cannot ignore inflation running above target for years. He also defended speaking directly with communities as part of demystifying the Fed’s role.
Key takeaways
- Farmers told Goolsbee that lower crop prices and higher diesel, fertilizer and shipping costs are squeezing margins in the 7th District.
- Goolsbee said local visits can reveal economic turning points before they appear in lagged national data.
- He argued that supply-driven inflation is harder for the Fed to fight than demand-driven overheating because rate hikes do not lower fuel or fertilizer costs.
- Goolsbee said persistent supply shocks can’t be ignored if they keep inflation above the 2% target for years.
- A farmer said corn had risen from $4.50 to $5 a bushel in the last month, but expenses were still high enough to make it a tight year.
Notable quotes
“-Whenever President Goolsbee comes down, Austan will come in town with a thousand-foot view”
“they can identify trends before they show up in the data. And that's very important”
“You know, it's always the nightmare of the Central Bank if you're facing stagflationary shocks, because there's not an obvious playbook”
“I do think even though the Fed can't pump oil, it can't ignore permanent inflation shocks that threaten to drive inflation above the target”
“The cost of fertilizer, the cost of diesel, the cost of shipping, the cost of all of these things”
How the episode opens
Westin: This is a story about the view from the ground, the U.S. economy is often measured in big numbers, but it is lived in communities across the country in factories, on farms and in the small businesses where Americans earn their living. For the Federal Reserve, understanding that economy means getting out of Washington and listening to what people are seeing and experiencing in their own homes and jobs.
Chicago Fed President Austan Goolsbee took Bloomberg's Michael McKee to rural Illinois, where farmers say the forces shaping the broader economy are cropping up in their backyard. -In the Federal Reserve's 7th District, harvest is underway for farmer Troy Uphoff. So this is a soybean field.
-Yeah, planted probably in mid-April. Harvest is the best time of year because you truly get to see the fruits of the nature. -Harvest is part of a family tradition stretching back nearly two centuries, giving him a long view of the good years, the bad ones and everything in between.
-Farmers in general are always optimistic, but have they had a rough two years? Absolutely. -Well, what's happened to the crop prices?
-So the crop prices are lower, mainly due to tariffs. Anytime you look at a tariff, a tariff is essentially a tax on a product. And it lowers our price because obviously we have that competition coming in and we have the lack of our demand.
Because whenever you put a tariff on one country, they're definitely going to put a tariff on one of your products. So the American farmer has been hit very hard by tariffs. -And with crop prices low, every dollar it takes to grow them matters.
-Hear that noise? That is 10 gallon per hour at 6 dollars a gallon right there. Farmers are struggling in the rural economy right now.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- inflation pressures
- farm economics
- crop prices
- fuel and fertilizer costs
- fed policy
Watch the episode
Watch “The Inflation Warning Coming From America’s Farms” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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