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This publication attempts to explain in understandable fashion major aspects of the cost-price dilemma facing agriculture. While the end result is declining net farm income 1 the problem has origins in several areas. Increased use of capital in the form of machinery, improved varieties of seed 1 and increased use of fertilizer have contributed to an increasing rate of output in agriculture. Increasing demand for food marketing services has raised marketing costs. The inelastic demand for food means that prices must decline substantially before consumers will purchase the increased output. Increased use of off-farm purchased items of production has increased cost of operation. The combination of these factors has resulted in what is commonly termed the "cost-price squeeze."

Publication Date:



Center for Agricultural and Economic Adjustment, Iowa State College


Ames, IA


Agribusiness | Agricultural and Resource Economics | Agricultural Economics | Economics

How Agriculture Operates: In Production, In Marketing