Straight from the Horse's mouth

Duane A. Lienemann,

 UNL Extension Educator,

 Webster County

July 29, 2011 Edition

First of all I have to make an observation of nature. Did any of you make note of all of the fireflies that were everywhere 2-3 weeks ago? I marveled at them when I came home in the dark of evening, wondering how many there were and why there were so many. It also brought me back to my childhood chasing them, trying to put them in a jar. This afternoon coming home I couldn’t help but notice thousands of dragonflies plying the skies. I don’t recall ever seeing them other than over a pond as a kid, and never so many of them flying, helicopter like, over corn and bean fields. I will leave the whys and wherefores to my entomologist friends and instead go to a topic that seems appropriate this week.

Discussion at the coffee shop this morning included the topic of grilling steaks and eventually moved to the cost of those steaks and other foods and how much of that dollar the farmer really gets. It piqued my interest in trying to discover how much more money that we now spend on food. Rational people would assume that we are paying a higher percentage of our income on food than ever before, but as sports reporter Lee Corso is fond of saying……”Not so fast my friend!”
While it’s true that U.S. food prices have been rising recently, believe it or not the percentage of disposable income Americans spend on food continues to shrink. Regardless of what you may think ---Americans continue to spend less of their dollar for food. It is true that U.S. consumer is spending a bit more of their disposable income to purchase food than the previous year, but they still enjoy the cheapest, most abundant supply in the world, OK, you may say – back that up.
One only has to go to the USDA’s Economic Research Service (ERS) to look for research on food and there it is. It was as if things just fell in place for me as I was researching this topic. It just so happened that the ERS just released the latest "meat prices spreads" this Friday afternoon. If you are interested you can find these spread sheets on the internet at: http://www.ers.usda.gov/Data/MeatPriceSpreads. I have to admit I am surprised and little puzzled on what these “spread sheets” show. Basically, you will see that there is a fairly large spread between what farmers and ranchers receive for a pound of beef and what retailers take in. Farmers received 46.3 percent of the retail value of a pound of beef. That's about what they got in 2005. So when people blame the farmer for higher prices at the grocery store the last couple of years, they may want to get their facts right. The farmer doesn’t get any more of the food dollar than they did years ago.
Now going back to the coffee shop discussion on how the price of that steak they wanted to grill over the weekend had gone up tremendously. I thought this was a good time to discuss who really gets the beef (or the money for it) when it comes to the cattle market. I wondered if anyone had looked at the distortion that seems to be in place between what the retailer gets and what the producer of that food actually gets. Interesting enough, one of the issues the USDA has been looking into over the past year is whether the markets for food are distorted in a way that unfairly diminishes the share of the food dollar going to farm producers. I really thought it may have moved to the positive side for producers but surprisingly, not much has changed over the past several years. When it comes down to it, farmers and ranchers still receive less than half of what is collected at the cash register for a pound of burger or even that rib-eye steak.
According to this report the share of American consumer’s disposable income spent on food averaged just 9.4 percent (5.5 percent eating in and 3.9 percent eating out) during 2010, matching the record low set in 2009. I have to admit that really surprised me, so I had to dig a little deeper. I found that on a historical basis it may surprise you. In 1929, the first year reported by ERS, Americans spent 23.4 percent of their disposable incomes on food. That is 2 ½ times what we spend today. They spent 20.3 percent on food at home, and 3.1 percent on food away from home. The highest percentage reported took place in 1933, during the peak of the Great Depression, when Americans spent 25.2 percent of their incomes on food. By the mid-1930s, the percentage began to generally decline each year until moving upward during the mid- to late- 1940s and World War Two, when the percentage hovered in the low 20s. Since 1948, the slope has been distinctly downward. In 2000, Americans spent less than 10 percent of their disposable income on food for the first time. If you compare that to other countries it doesn’t sound too bad. Compare that to folks in Mexico, who spend 22 percent, China, 28 percent and Russia, 37 percent. If you want to know who spends the highest percent of their dollar on food, you may want to look at Jordan, whose residents spend 41 percent of their money on food; in Indonesia it’s 46 percent, and in Azerbaijan, they use the greatest proportion of money on their food—51 percent. Think about that for a moment. Maybe we don’t have it so bad.
Why has food become relatively cheap in the total scheme of things? One of the main reasons has been improved efficiency in agriculture. For instance, corn yields in the U.S. averaged less than thirty bushels/acre prior to the 1930s. But with the introduction of hybrid seeds around 1935, the intensified use of fertilizer and herbicide (in 1972, nitrogen fertilizer was added to 96 percent of corn acreage), insecticides, and genetically-modified seeds, by 2010 the average corn yield reached 158 bushels/acre and doesn’t seem to be slowing down. Livestock production has also greatly increased in efficiency. Never before have we been able to produce more pounds of animal protein on less input of feed and labor. It should be obvious, even to our detractors, that Americans continue to get a bargain with their food dollar. We should all thank our producers and efficient farmers and ranchers for making that bargain possible. Now enjoy that steak!
The preceding information comes from the research and personal observations of the writer which may or may not reflect the views of UNL or UNL Extension. For more further information on these or other topics contact D. A. Lienemann, UNL Extension Educator for Webster County in Red Cloud, (402) 746-3417 or email to: dlienemann2@unl.edu or go to the website at: http://www.webster.unl.edu/home