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Your Food Dollar and the Farmer’s Cut July 5, 2013

 

By Kevin Rogers, Arizona Farm Bureau President
My wife, Janel, does the grocery shopping for our family of five. She’s asking why her food budget dollars don’t go as far as they did in the past.

The Arizona Farm Bureau does a food market basket survey every quarter. Our survey of different grocery stores sampling the same 16 products each time shows food costs are beginning to rise again. Fortunately, food prices can also trend down. So you and Janel are not imagining higher prices; it’s reality.

Every farm product that leaves my farm gate and ends up on your dinner plate takes energy to produce and distribute. It takes natural gas to produce the fertilizer I use. It takes diesel and gasoline to produce the crop and transport it from my farm to the market. It takes energy to process and package and then transport to distribution centers. And finally it takes fuel to get the finished product to your grocery shelf or farmers’ market.

In 2008 during the most recent and dramatic rise in food prices, world food costs rose 43 percent in a twelve-month period, well above our rate here in the U.S. Back then, it was partly blamed on ethanol. But, only three percent of that 43 percent rise was directly attributable to U.S. production of ethanol. Back then, despite record corn prices due to increased world demand, the value of the corn in an 18-ounce box of corn flakes was still only 8.5 cents. That’s about the price in a box of corn flakes today.

According to the USDA, on average, the farmer’s share of your food dollar is 19 cents. That 19 cents is covering increased costs associated with fuel and other production expenses.

Higher prices for food worldwide go beyond higher commodity prices. Droughts in Australia and other countries can impact supplies of grain and beef. Plus, standards of living, particularly in India and China, are increasing and global demand for better more varied diets. When demand goes up, but commodity supplies remain tight, for example with wheat and soybeans, you’ll see price spikes on food items.

Agriculture is not a high-profit business. Plus, wholesale agriculture (agriculture that’s not direct to the consumer, like a Farmer’s Market) is a price taker, not a price maker. It’s an industry that does not determine the price it receives for its products. Global market demands and global supplies drive the price farmers and ranchers receive. It’s to your benefit for U.S. agriculture to stay competitive in the world market. If we lose our competitive edge, we’ll become dependent upon other countries for food as we currently do oil. Food prices will go up too.

The Rogers family hangs out with Mike Rowe of "Dirty Jobs." Janel knows the value of affordable, healthy, safe and available food partnering with Kevin on the farm.

But agriculture is a business we love. It’s part of why Janel and I are in agriculture. Despite tight margins, serious labor shortages and the risks associated with non-competitive costs potentially forcing us to export agriculture production to other countries, we keep trying.

Janel is reminded of this every time she does the grocery shopping for our family.

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