Food Dollar, by John Parker

When we make those trips to the grocery store in 2013, predictions are that our food is going to cost slightly more, especially dairy, meat and poultry products.  We might ask why these products may cost more this year than last.

It is a response on the part of farmers to very high production costs, so they are cutting back on production.  When that happens, there is less on the market to buy and prices tend to edge upward.  Also, farmers need more for what they sell to cover the higher costs that they are experiencing.  Even with some higher prices for what they sell, USDA says hog and poultry farmers will have a tough time breaking even this year.

Again we might ask why are costs going up to farmers to produce their milk, meat or poultry products.  They are due to continuing shortages of hay and grain caused by last summer’s drought and to the demand for corn for ethanol which took 38 percent of the 2012 corn supply.

As consumers, we should understand that farmers are not getting rich from the higher prices we may find in the grocery store.  Farmers are consumers too, and are just as interested in prices in the store as anyone else.

For every dollar we spend on food in this country, the latest figures show that farmers get less than 12 cents.  Where does the other 88 cents go?  Labor is the biggest cost.  Labor and energy intensive jobs like food processing, packaging and transportation, all involving large amounts of labor, gobble up most of  your food dollar, according to USDA.  Food produced at the farm does have to be put into a form and package that we will buy and then brought to the grocery store for our purchase.

Another interesting figure crops up from USDA.  That is called “at home food spending as a share of total consumption expenses” for 2011, the latest available.  That figure shows we spend just 6.7 percent of our incomes for groceries in this country.  Compare that to 18 to 25 percent or more in other countries.  While we may complain about what we have to pay for food, we are fortunate compared to most countries in the world.

Much criticism is leveled at using corn for ethanol production as a cause for higher food prices.  Actually the direct corn value of each food dollar is small.  Over the past several years corn has represented about 15 percent of the total value of all U.S. food and feed products.  Using a rough calculation, that suggests that corn’s share of the food dollar is less than two percent.  Studies have shown there is no real relationship between corn prices and retail food prices.

While we may not like slightly increased prices for meat, milk and poultry products, Dietary Guidelines for Americans and the American Heart Association recommend a diet containing these products.  There are nutritional benefits from the quality and quantity of protein, vitamins and minerals found in these products, compared to an all-plant diet.  Like any good diet, eating in moderation and exercising are good rules to follow.

So when you go to the market don’t complain that local farmers are getting rich if you have to pay a bit more for some food items.  It is truly amazing that just 2 percent of our population can produce enough food to feed the other 98 percent!

Parker is retired from The Ohio State University and is an independent agricultural writer.