As Food Prices Rise, Farmers Are Not to Blame
You may have noticed that, despite your increased efforts to make every last dollar count, your recent grocery bills aren't getting any smaller.
Why is that you might ask?
With the rising cost of oil and the extreme weather patterns that have left farm communities ravaged, it appears high food prices are here to stay. But, who's really profiting from these increased prices? If not the consumers, it must be the farmers, right?
Wrong.
The National Farmers Union released its most recent Farmers' Share (of the grocery tab) data, and once again, farmers saw little share of the profits—despite the high cost of food.
| Product |
Retail Price |
Farmer's Share |
| Multi-Purpose Flour, 5 lbs |
$2.99 |
$0.98 |
| Bread (1 lb. loaf) |
$3.89 |
$0.20 |
| Cereal (18 oz.) |
$4.39 |
$0.09 |
| Bacon (1 lb.) |
$5.49 |
$0.92 |
| Soda (2 liter cola) |
$1.09 |
$0.10 |
| Lettuce (head, 2 lbs.) |
$2.79 |
$0.40 |
| Fresh Carrots (3 lbs.) |
$3.30 |
$1.39 |
| Milk (1 gal. fat free) |
$4.39 |
$1.67 |
*Retail Based on Safeway, Washington, D.C., May 31, 2011
Farmers are often unfairly held responsible for high grocery prices, when in reality they receive just 15.8 cents for every food dollar that consumers spend in the store. That share is down 3.2 cents from just last year, and is a long fall from the 40 cents for every food dollar that farmers received in 1950.
And that infinitesimal 15.8 cents? It isn't just money in farmers' back pockets. This money is used to help cover the costs of running the farm—forcing farmers to rely on unreliable high yields and market prices just to break even.
As for the other 84.2 cents, it pays for the marketing, processing, wholesaling, distribution, and retailing of the product—factors the farmer has no say in once he sells his product to food manufacturers.
According to a NPR story that ran just this past January, Brookings Institute rep, Homi Kharas says, "when a U.S. consumer buys a box of cereal or a cup of Starbucks coffee, she is mostly paying for the packaging, marketing, and attractive store fixtures. So the shopper is not greatly affected by the underlying commodity price…"
In addition to these costs, food prices tend to be "sticky" meaning that when they rise it is very unlikely that they will fall again. That's because most food manufacturers are quick to pass along higher commodity prices to shoppers, claiming that they just can't sustain the business unless they raise prices. However, when commodity prices drop, the consumers almost never see the savings.
Bottom line: while food company profits, commodity prices and food prices continue to rise, the farmer's share remains relatively unchanged.
So the next time you pick up your favorite snack and are shocked by its high price, don't be so quick to blame the man in the field. Rather, look a little closer at that shiny packaging—it might not have any nutritional content, but it sure adds value.
 
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