Food price jump unlikely
John Schlageck
Saturday, June 23, 2007
Listening or watching the latest news spots would lead today’s consumer to believe this country’s farmers are one of the main reasons for the recent increase in food prices at the supermarket.
“This is simply not true,” says Jeff Grossenbacher, Nemaha County farmer.
Like many grain producers across Kansas, Grossenbacher understands that higher food price, although small, are the result of increasing costs of processing, packaging and transportation – especially with the high cost of fuel.
Farmers don’t share proportionately in this increase at the grocery store, the Nemaha County farmer says. The amount a farmer receives is only pennies or two to three cents per loaf of bread.
While a backlash has not yet occurred among U.S. consumers, national news exposure appears to be ramping up, and consumers could one day call for reigning in of higher milk, produce and meat prices.
Still food prices are a great buy and without question, the wise shopper must be knowledgeable when spending her or his hard-earned dollars. Take the example of Battle Creek, Mich., where the cost of cereal has increased while the size of the boxes are smaller.
Looking even closer at this food product requires a look at the ingredient cost. A box of corn flakes may cost more than $3, however there is only approximately 2.2 cents worth of corn in that box, according to Terry Fancl, American Farm Bureau Federation economist.
Even if the price of cereal doubled, there would only be a miniscule increase in price, Francl says.
“The average U.S. consumer is only looking at maybe a two-tenths of 1-percent increase in food,” the AFBF economist notes.
U.S. consumers spend less than 10 percent of their disposable income on food products they eat.
The price consumers pay for home supplies, cigarettes, videos and just about anything else you can cram into a shopping cart is another matter and should not be confused with food.
It has become fashionable to bash ethanol for causing food prices to increase. Although corn-based ethanol production is expected to increase 58 percent in 2007, retail food prices are not expected to increase substantially during the same time period. U.S. food prices have increased about 7 percent so far this year, according to the U.S. Department of Agriculture.
This can be attributed primarily to bad weather that harmed fruit and vegetable production, as well as small Australian wheat crops. Retail food prices, particularly for poultry and beef, will be slightly higher during the next few years due to growing renewable fuels production in the United States.
The American Farm Bureau Federation tracks retail food price trends through its quarterly 16-item market basket survey. AFBF’s most recent informal survey revealed a 4 percent increase in retail prices from the fourth quarter of 2006 to the first quarter of 2007.
One producer believes doubling the price of food in this country would still be a bargain when compared to what other countries pay for food. He also mentioned that when he starts hearing horror stories of people dropping cable television, high-speed internet, building new homes with only two garages and eating honest-to-goodness, home-cooked meals, he’ll start worrying about consumer spending for food.
Yes, this country remains blessed with the most affordable, healthy food anywhere on the planet. We are fortunate to spend as little disposable income as we do on the food we feed our families.
F John Schlageck is a leading commentator on agriculture and rural Kansas. Born and raised on a diversified farm in northwestern Kansas, his writing reflects a lifetime of experience, knowledge and passion.
daveedailey (anonymous) says...
It is not the farmer that makes any money!!Believe me, been there done that. I still have some farm ground but it only produces enough to pay the taxes. I feel for all farmers because it is hard work and 24/7. Remember they also have to pay the high fuel prices, realestate taxes, income taxes, health insurance and it is done with the sell of their crops. What I have yet to figure out is why I pay realestate taxes on the ground, then when I sell a crop I have to pay income tax. For most farmers it is a no win situation, very similar to what I am saying, only for most, on a much larger scale. Eventually, in a future generation, there will be no farm ground. Big corporate company's will buy it up and ruin what is there for furture use or even just build on it. I admire the tough person who can make a go of farming and always wish them the very best of luck.
June 26, 2007 at 4:27 p.m. ( permalink | suggest removal )