Farmers Don’t Get Much Bread for that Loaf

March 21, 2008

WASHINGTON (Mar. 21, 2008)—Though U.S. shoppers still pay far less for their food than shoppers in any other country, opponents of farm policy who once complained about low commodity prices are now taking aim at family farmers for higher prices at checkout lines.

They claim that some farmers’ recent good fortunes are to blame for growing grocery bills, and that because prices for some commodities have risen, farmers no longer need a safety net in the pending farm bill.

As you’d expect, producers from across the country have taken issue with this twisted logic.

“[F]armers and ranchers receive only 20 cents out of every dollar that consumers spend on food,” the National Farmers Union pointed out in a recent handout prepared for reporters and Capitol Hill staff.

Off-farm costs, including marketing, processing, wholesaling, distribution and retailing, account for 80 percent of food costs, according to stats kept by the U.S. Department of Agriculture.

Just look at a loaf of bread that could retail for $2.69 or more. That loaf only includes only about 20 cents worth of wheat.

Yet wheat farmers are facing a lot of criticism for the current high wheat prices, which have risen over the past year because of low stocks, weather problems and other factors.

“Even at higher prices, consumers spend on average just 11 cents a day for wheat,” explained David Cleavinger, a Texas farmer and president of the National Association of Wheat Growers. “Most food manufacturers lock in commodity prices far in advance, and the run up in food costs is mostly a result of higher energy and transportation expenses—which farmers also have to contend with.”

Another commodity that is no stranger to being blamed for increased food costs is sugar. Claims of high sugar prices are still being made by some confectioners on Capitol Hill, even though sugar prices are very low right now.

“Candy companies are paying less for sugar today than they did when Jimmy Carter sat in the Oval Office,” said Jessie Breaux a Louisiana grower who is the president of the American Sugar Cane League. “But you’d be hard pressed to find a candy bar at 1980s prices today.”

Breaux explained that raw commodity prices—no matter if they are high or low—have very little to do with a food product’s final price, pointing out that there’s just about a penny’s worth of sugar in a 75-cent candy bar.

“If we gave them the sugar for free and they passed all the savings along to the end consumer, that 75-cent chocolate bar would still cost 74 cents,” he noted.

While unpredictable commodity prices shouldn’t affect grocery shoppers very much, they do have a huge impact on farmers.

“A strong safety net adds some certainty and stability to a farming operation, which is even more important when the markets are so volatile,” Cleavinger said. “I’ve been farming for 30 years, and trust me, we’ve had far more years on the historic-low side of the equation that we’ve had on the historic-high side.”

He also explained that the way that farm policies are structured, the bulk of federal assistance kicks in only when prices fall.

Fewer payments are made when prices are higher, which is why the commodity title in the current farm bill came in $25 billion under budget.