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As food prices move upward, farmer's share budges little

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Last month saw wholesale food prices record the largest increase in 36 years, and industry analysts’ crystal balls don’t foresee how much more they’ll rise. Some say, “You ain’t seen nothing yet,” that by the end of this year food prices will be sharply higher. But, familiar story, farmers aren’t likely to reap much of the increase, says James Dunn, professor of agricultural economics at Penn State’s College of Agricultural Sciences

 

Some base their personal indicator of inflation on the cost of a Budweiser, others the Big Mac. I base mine on the price of potatoes.

I’m a fairly frequent supermarket shopper and browser, with a keen interest in the variety of foods and food products available, and their prices. When visiting other areas of the country, I like to wander through a supermarket and see how things differ from those at home, particularly in the produce aisles.

But, I digress. For the longest time, the price for potatoes (which I love, in any form or fashion) was pretty steady at 39 cents to 49 cents per pound. Then, when energy prices spiked and oil climbed beyond $100 per barrel, potatoes went to 69 cents, then 79 cents, then last week, 99 cents, and yesterday, $1.49 — a 50-cent jump, and a bigger increase proportionally than prices at the gas pump.

I’m no authority on potato production, but I’m not aware of any disaster that has befallen the industry to cause that kind of increase, other than the rapid inflation in the food sector as a whole.

Last month saw wholesale food prices record the largest increase in 36 years, and industry analysts’ crystal balls don’t foresee how much more they’ll rise. Some say, “You ain’t seen nothing yet,” that by the end of this year food prices will be sharply higher.

But, familiar story, farmers aren’t likely to reap much of the increase, says James Dunn, professor of agricultural economics at Penn State’s College of Agricultural Sciences. He looks for “high commodity prices for the next year or so,” thanks to the “perfect storm” of more mouths to feed, low agricultural production, and weather disasters in many areas of the world.

While food prices originate at the farm level, he says, “most of the American food dollar goes to processing, transportation and marketing — not to the producers.”

Most foods in the supermarket have a fairly small agricultural component, Dunn notes, “but some manufacturers won’t let that hinder their pricing strategies.

“Sometimes the processor will use the excuse of higher farm prices to recoup some profit that slipped away due to other input costs. We’ve seen cereal companies cite high corn prices when raising their prices much higher than the value of the corn in the product.”

(Not to mention another gambit widely used over the past several years: reducing the amount of product in the package while keeping prices the same, or increasing them.)

As prices at the supermarket soar and media report record prices for crops, the impression among many consumers is that farmers are raking in megabucks at their expense, all the while asking broke Uncle Sam for subsidies.

They haven’t a clue that the farmer’s share of the food dollar has changed little over the years, despite constantly increasing production costs.

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