TIME Flies: Part 2

June 2, 2009

opponents tell it, you’d think most farmers are raking in the big bucks.

But anyone who’s been around the business knows that’s never been the case. The margins in farming are as thin today-maybe thinner-as when TIME magazine had this to say in a 1978 cover story “The New American Farmer“:

To succeed in this fast-changing, low-margin business [of farming], a fellow has to be nimble. Says Jack Neuman, 45, who raises corn, soybeans and hogs in Sangamon County, Ill.: “It used to be that if you had a child who wasn’t too bright, you’d say, ‘Son, you’re going to be a farmer.’ Nowadays, if that dumb kid comes along volunteering to farm, you’ve got to say, ‘Oh, a man in hell would love to drink a glass of ice water, but it just can’t be done.’ “

Some city consumers may sneer at that statement. Though recent polls show widespread sympathy for farmers, there has long been a fashionable opinion that big farmers, at least, are pampered wards of Government living high off the inflation that is pushing up food prices-10% this year. Few realize that 87% of the rise in food prices since 1973 has occurred after the food left the farm. That is a consequence of Americans’ insatiable desire for ever fancier processing and packaging, along with rising off-farm wages.

Zooming costs of processing and distribution have created a strange paradox. Higher farm prices instantly bring increases at the grocery checkout, but retail food prices can also go on rising while farm prices drop sharply.

High as retail food prices have gone, food accounts for only 23% of all private spending by Americans…By contrast, food consumes 25.8% of all private spending in France, 27% in West Germany, 33.1% in Japan, 42% in Brazil, 52% in the U.S.S.R.

Enough food is left over to make the export capacity of American agriculture the hope of the have-not world. Farm-product exports tripled in the past six years to almost $27 billion, helping mightily to offset the cost of imports…Pat Benedict [a Minnesota grower] and farmers like him are America’s best hope to counter the trade challenge presented by the oilmen of Araby and the energetic manufacturers of Japan.

[But] over the years, Benedict has averaged a return of only 3.5% on the $3.5 million present value of his investment… Such profits on even the most efficient farms are too meager to interest big corporations. The fears that the family farm would be taken over by “agribusiness” have proved unfounded.

TIME may has well have been commenting on the situation facing farmers today.

Efficient family-owned businesses, not corporations, are still the face of farming, and these small business are still struggling to improve efficiencies and overcome high input costs and low prices—amazingly, some commodity prices are below levels seen in the ‘70s.

And the large grocery manufacturers are still blaming farmers when they raise prices at the grocery store.

That situation has gotten so bad of late, and food company profits have gotten so bloated, that grocery stores have even started asking food manufacturers to pass along lower commodity and energy prices to shoppers.

If the scene TIME described in the ‘70s is any indication, don’t hold your breath waiting for lower grocery bills any time soon, even as the farmers’ share of the food dollar continues to shrink.

Part one: The myth of the large farm and “corporate agribusiness.”