UNL Extension Educator,
Webster County
August 12, 2011 Edition
Two weeks ago I wrote a column on the value of food produced by farmers and the simple fact that we spend less than 10% of our income on food, the lowest in the world. I had intended to continue my discussion on that topic the following week but got wind that the DOT was fielding comments on a proposed change to regulations concerning the need for CDL to run any farm equipment. It was of concern to me and felt that our area producers should be aware of this potential change in regulations. It appears that during the public comment sessions that ended on August 1, common sense won out!
The U.S. Department of Transportation's Federal Motor Carrier Safety Administration (FMCSA) announced this week that it has no intention to propose new regulations governing the transport of agricultural products. The agency also released guidance designed to make sure states clearly understand the common sense exemptions that allow farmers, their employees, and their families to accomplish their day-to-day work and transport their products to market. If you want to read more on it go to: http://www.dot.gov/affairs/2011/fmcsa2411.html. Finally, some good news for agriculture!
Farmer’s Share of the Food Dollar: Evidently that column from a couple of weeks ago resonated with some people and I got some pretty good input back as well as some challenges. I am cognizant that people have seen an increase in the cost of food. I like to eat too (that should be obvious to most of you that know me) and my wife shops the local grocery store. The point was that on an average the farmer still gets about the same percentage of the food dollar for his product that he has been getting for years. There are of course a lot of reasons that food costs is higher and yes I agree that the commodities prices have gone up. But you would be surprised how much that increase in per bushel price transcends into a per pound increase and remember that most food products are less than a pound. Here is an example: $7/bu. corn = 9¢ of grain for a $4 -12 oz. box of cornflakes. Consider bread: $11/bu. wheat = 19¢ of grain in a $3.89 loaf of bread. Incidentally, wheat is now less than $7.
In my research on this topic I found some interesting information that breaks down what a farmer gets for his product. It kind of helps put things in perspective. What do you think would be the portion of the consumer dollar that the farmer gets for his product? According to a recent USDA report the farmer’s share of the food dollar is less than 12¢. How can that be you might ask? Let’s break it down a bit. Non-farm costs, including marketing, processing, wholesaling, distribution and retailing, account for 88¢ of every food dollar spent in the United States. The fact is, the farmer’s share of the consumer food dollar has been shrinking for decades. In 1952, farmers earned 47¢ of every dollar spent on food. Today, they earn only 11.6¢. Only a small percentage of our food dollar actually pays for the production of the raw commodity itself
I think we need to set the record straight. When it comes down to it there are several factors that come in to play. First high energy costs are driving food prices. Don’t think for a moment that the price of oil, gas and other fuels, as well as other shipping costs don’t have a huge affect. Food costs are not driven by the commodity prices farmers receive or by the demand for corn due to ethanol production. Rising energy prices have twice the impact on the Consumer Price Index (CPI) for food than the price of corn. If you are so inclined to read what the USDA has to say on the price of goods, and you have an internet connection go to: http://www.ers.usda.gov/Publications/ERR114/ERR114.pdf/
Secondly don’t forget about inflation which is adding to increased food prices. Food prices have always, and will continue to increase. According to the Bureau of Labor Statistics, the 25-year average annual food inflation rate is 2.9%. Government statistics confirm that the increase that consumers face is standard. It is true that farmers are receiving higher prices for many crops they produce. One of the positive sides of this is that instead of relying on government subsidies, farmers are now able to get a good price from the marketplace. In the case of corn, increased ethanol production is creating economic opportunities for rural communities, restoring profitability to family farms, and providing a safe, renewable fuel for our nation’s future. We shouldn’t begrudge farmers the current prices they are now getting for their commodities. How many years has those prices been below the cost of production. One of the biggest things we need to remember is that high commodity prices help small town and big city Main Street.
The National Farmers Union has calculated the farmer’s share a little differently and their study indicates that farmers and ranchers receive 15.8¢ of every food dollar that consumers spend on food at home and away from home. The difference being in that they also consider the restaurant, which does make sense to me. One example that they use: When a shopper pays $5.50 for a pound of bacon, the hog producer receives less than $1. You may find interesting a NFU chart breaking down the farmer's share of several grocery-store basics studied in June of 2011 which can be found at: http://www.nfu.org/images/stories/June2011_Farmers_Share.pdf /
When it comes down to it, only a small percentage of our food dollar actually pays for the production of the raw commodity itself. I think it’s easy to see that what you pay at the store has even less to do with the price of what the farmer gets for the commodity that he works so hard and so efficiently to produce – don’t cuss the farmer –Thank him!
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
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