Who’s Gobbling Up Food Profits?

May 7, 2008

WASHINGTON (May 7, 2008)—The furor over grocery store sticker shock reached a boiling point last Thursday as the Congressional Joint Economic Committee held a hearing to investigate the impact these food prices are having on everyday Americans.

Tom Buis, the president of the National Farmers Union, told the Committee that he and all growers sympathize with the impact soaring grocery bills are having on low-income Americans.

“Food is not an optional commodity for anyone, regardless of income demographics,” he testified. “As a farmer from Indiana and a national farm leader, I find it appalling that anyone in America or the world would go to bed hungry.”

But rising food prices should not be pinned squarely on farmers and ranchers, he explained. “[F]ood price increases are not about lack of production, but other macro-economic factors including trade distortion, distribution and political decisions.”

Buis pointed to high fuel and shipping costs as the main contributors to steep grocery bills. He also explained how weather related shortfalls, a weak dollar, and speculators in commodity markets have aided the climb.

But what really caught the Committee’s attention was seeing how little of the food dollar actually makes it back to the farm. Among the examples laid out by Buis:

  • Wheat farmers see just 22 cents from a $2.69 loaf of bread;
  • Corn farmers get only 16 cents for every $5.05 box of corn flakes; and
  • Ranchers can expect to receive 88 cents for a $7.99 top sirloin steak.

For more examples, use this link.

All told, farmers and ranchers receive a paltry 19 cents from every dollar spent on food in this country. The rest is gobbled up by food manufacturers and grocery stores.

The National Farmers Union is not alone in its conclusions. The American Farm Bureau Federation, which often finds itself on the opposite ends of policy issues as NFU, just released a study with similar findings.

“Farm Bureau analysis of the costs of food production and marketing shows petroleum-based energy is the primary factor driving domestic food prices,” read an association release about the study. “Forty-four percent of rising food costs is due to energy costs.”

In a press conference this week, Farm Bureau President Bob Stallman cautioned against governments enacting policies that would intervene in commodity markets, saying such measures would be counterproductive to securing prices that are more moderate globally.

Other farm leaders agree and argue that the best thing that our government can do right now to alleviate the problem is to pass the farm bill currently pending in Congress—a bill loaded with nutrition programs for low-income Americans.

Jackie Loewer, a farmer and the chairman of the Louisiana Rice Producers Group, explained in a letter last week to Farm Policy Facts that the strong commodity title in the farm bill can also help.

“We should be having a discussion about adding incentives for producers to grow more in order to deal with food shortages, not disincentives…there needs to be a strong commodity title in the new farm bill if we are all going to beat this problem together,” he concluded.