This observation by President John F. Kennedy may have greater application today than a generation ago, illustrating the economic reality that faces our farmers and ranchers.
Today, less than 2 percent of America's population is producing for our nation's and world's food and fiber needs. As consumers, we continue to enjoy high-quality, safe and abundant food at the world's lowest cost. We have been blessed with processed and fresh food products in our corner grocery stores that have traveled an average of 1,200 miles before ultimately reaching our kitchen tables.
Unfortunately, current economic conditions, energy policy uncertainty and diesel fuel prices eclipsing $4 a gallon are now affecting food prices and will impact this summer's farm production costs. Policies protecting local food production capacity and shortening supply chains are critical issues for Utah consumers.
There have been a lot of media coverage and editorials in the past several months blaming various factors for causing food prices to increase. Some of these even go so far as to point a finger at farmers and ranchers for supposedly reaping the benefits of higher retail prices for food products.
In reality, transporting, processing and packaging food and agricultural products cost significantly more today than in recent years. Meanwhile, the farmer's share of the retail food dollar has continued to hover between 20-25 cents since the 1970s.
One must only look at the cost of raw agricultural products compared to food that has been further processed. For example, today farmers receive $5.50 per bushel of corn and average 7.9 cents for the corn in each box of Corn Flakes. When Corn Flakes cost approximately $3.30 for an 18-ounce box at the grocery store, this translates into the farmer getting about 2 percent of the retail price.
The same can be seen with a loaf of bread that costs $1.78. As of the end of the first quarter of 2008, farmers received 16 cents for the wheat used to produce a typical 20-ounce loaf of bread, which translates into the farmer receiving 9 percent of the retail price for that loaf.
So, what is really driving the increase in food prices? For starters, runaway energy prices are a major contributor behind the higher retail cost of food. After many commodities leave the farm gate, high costs for energy, fuel and transportation are added and passed on to the consumer. These increased retail prices are especially noticeable on convenience and highly processed foods.
Further, market demand for American farm commodities including corn, wheat and cheese remains strong both at home and overseas, which plays a role in the recent increase in food prices. The falling value of the U.S. dollar has made American farm commodities more attractive globally.
Farm and ranch exports soared to a record $90 billion in 2007, good news for our burgeoning balance of trade deficit. However, that instability in the value of the U.S. dollar is contributing to world oil futures that are approaching $120 a barrel.
Farmers are price takers, not makers. This reality, coupled with higher production and transportation costs, has farmers and ranchers also feeling the impact of escalating energy costs and the present economic downturn.
Despite what some critics might say, farmers are still getting wholesale prices in a retail world.
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* LELAND HOGAN is president of the Utah Farm Bureau Federation.
Leland Hogan
