Editorial by MFU President Alan Merrill

April 16, 2008

Farmers Share of the Food Dollar Just 20 Cents

Spring is on its way, and farmers across the state are ready to be in the field and gardeners are itching to plant a few seeds.  Current events, however, are not as positive as thoughts of spring.  Headlines blare the uncomfortable message of $4 a gallon gas on the horizon; and according to the Consumer Price Index, food costs are about 4 1/2 percent higher this year than last year – even higher in the West. 

Just in the past week a statewide newspaper published a detailed story on the rising cost of living.  Several people interviewed for the story attributed the consumer pinch to higher energy, transportation and wheat and beef costs that “…have boosted the overall Montana economy and helped farmers, ranchers and the oil industry…” while implying that everyone else is left to pick up the high costs.

It appears that some people may have heard about the high farm commodity prices right now and come to the conclusion that farmers are rolling in the dough at the consumer’s expense.  Actually, it’s not quite that simple. 

First of all, there are some decisions made by farmers that collectively affect the market.  The first week of April, for example, the U.S. Agriculture Department (USDA) reported on farmers’ planting plans based on thousands of farmers surveyed at the end of March.  The report said that less corn would be planted and more soybeans.  This news then caused the price of corn in the commodities markets to rise and soybean prices to fall.

There also is pressure on wheat supplies right now.  The USDA reported that wheat stockpiles have fallen in the last year, which means that there is little buffer if the weather is not favorable this year and harvests are poor.

The reduced supply of wheat is one reason market prices for wheat right now are at much higher levels.  Current prices in the $11 to $15 per bushel range are significantly higher than the $3 per bushel farmers received not so long ago.  Given this information, one could assume that farmers are smiling all the way to the bank.  Most of the farmers I have talked to, however, sold their crop after last summer’s harvest at the $5 to $7 per bushel range.

Of course, the cost of fuel affects us all as we make our way to work.  Whether you are commuting across town or across the field, the rising cost of fuel has impacted us all dramatically. In fact, rising energy prices have twice the impact on the Consumer Price Index for food than the price of corn.

What farmers everywhere are struggling with now is finding that their costs of putting in a crop are all tied to the current higher price instead of what they actually received last fall.  Fuel, fertilizer and other costs of production all have skyrocketed.  Evidently, everyone wants a piece of the perceived boom and that affects the cost of our food. 

So, even though farmers have received somewhat higher prices for some crops they raise, they are not price gouging. Farmers are price takers – not price setters – and they pay the same higher retail costs typical for any Montana family.

The National Farmers Union publishes a “farmers share” report that details how much of a typical food budget goes to the farmer.  USDA estimates that farmers and ranchers receive only 20 cents of every food dollar that consumers spend.  According to the USDA, the ‘Farmers Share’ of the consumer food dollar has been shrinking for decades.  In 1952, farmers earned 47 cents of every dollar spent on food.  Now, off farm costs including marketing, processing, wholesaling, distributing and retailing account for 80 cents of every food dollar spent in the United States.

To look at it from another vantage point, the cost of sirloin steak reportedly increased by $2 per pound, but the rancher’s share increased just 10 cents.

There are a few bright spots in this rising cost scenario.  First, policies that are designed to support local farms, local food systems, and urban agriculture could be strengthened.  As fuel costs rise, there is more incentive to shorten supply chains.  The “farmers share” in 1952 was, in part, due to more local purchasing opportunities.

So, if possible, target your food dollars as close to home as possible.  And work for public policies that support these efforts.  It makes sense for you, for your neighbors who are farmers and gardeners, and for our environment.  I hope you have a great spring – and happy planting.

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