Cut to the Chase: Farmers’ Share of Food Dollar Continues to Shrink

By Kelly Smith

With farmers receiving higher prices (even record prices for some commodities) for the livestock and crops they grow one might surmise the logical consequence is the farmers’ share of the consumer food dollar is also rising. Not so.

An analysis of a recently published United States Department of Agriculture (USDA) report, “A Revised and Expanded Food Dollar Series - A Better Understanding of Our Food Costs,” illustrates the farmers’ share of the food dollar is shrinking.

According to the report, just 11.6 cents of our food dollar finds its way back into farmers’ pockets as the actual cost of the raw commodity. If you frequently eat away from home, the farmers’ share is only 3.4 cents. Where do the other 89 or 97 cents go? Just follow the money trail.

In today’s on-the-go society, it is commonplace to have two-income households. Because of personal priorities and time constraints, consumers eat many meals away from home and demand convenience in the food items they prepare at home.

Convenience has a price tag, and a significant one in regards to quick, easy-to-prepare food items. USDA indicates labor is approximately 50 percent of the cost of a food item, followed by a combination of energy-intensive sectors that represent almost 33 percent of the food dollar: processing, packaging, transportation, and actual energy costs. With labor costs relatively stable and predictable, one can easily see skyrocketing energy prices are affecting the food dollar every step of the way from field to pantry and refrigerator.

So remember, even though it might be easy to point the finger of blame at farmers (who grow and supply the livestock, crops, fruits and vegetables for a hungry America) as the culprits of food inflation, they in fact are not. As long as Americans continue to ask for convenience in food products, someone will supply it, but at a price. As long as energy prices remain unstable and unpredictable, the price tag for energy remains a moving target and continues its onerous effects on food prices.

There is a silver lining in the food cost storm clouds If America’s farmers were not as efficient as they are in every aspect of their daily challenges to produce our food, both in quantity and quality, just think how much our food might cost us. I don’t think we really want to go there.

(Kelly Smith, of Jefferson City, Mo., is the director of marketing and commodities for Missouri Farm Bureau, the state’s largest farm organization.)