Commentary: Getting a raw deal

On virtually the entire range of agricultural products, the message is loud and clear: Livestock producers’ and farmers’ share of the food dollar remains miserly, even as food prices—driven by rising energy costs—continue to climb.

According to 2010 USDA data, U.S.producers and farmers receiveon average only about only 20% of total consumer spendingon food. Off-farm costs—marketing, processing, wholesaling, distribution and retailing—account for the other 80%.

For example:

• A pound of bacon thatsells in supermarket for $3.99 a pound returns 52 cents to the pork producer
• Sirloin steak selling for $4.49 returns less than 98 cents to beef producers
• A gallon of milk, retailing at $4.39, returns$1.34 to the dairy farmer
• Bread retails for $3.79 a pound; flour sells for 52 cents a pound; farmers get less than 15 cents a pound for their crop
• A 13½-ounce bag of Lay’s Potato Chips selling for $3.99, returns only 8 cents topotato farmers
• Lettuce retailing for more than $2.19 a head produces only 40cents for growers

None of those year-ago retail prices have receded, and when newer data become available, it will likely show that growers got even less of a share of rising food costs this year versus last year.

Of course, consumers ultimatelycare about the prices on store shelves, not commodity returns at the farm gate. And since as a society we’re moving inexorably toward food and lifestyle choices that feature further processed, highly convenient products, that ratio of food dollar to farm returns isn’t going to reverse itself anytime soon.

Assessing the consequences

The consequences of this trend are problematic. For one, the number of ranchers and farmers who earn their primary living from production agriculture continues to decline. Some agricultural analysts would argue that the disappearance of farmers and producers—especially smaller, family-run operators—is largely because of price volatility in the marketplace. Smaller farms have diminished ability to weather commodity cycles, particularly recent ones fueled by rampant financial speculation activity.

But the low returns, even during years with strong crop yields, is driving many producers and growers out of the business. Add in droughts, such as the one affecting the Southwest this year, floods, wildfires or other natural disasters and the net effect is that fewer and fewer people want to take on the risks inherent in agriculture. That’s not good for the diversity that’s vital to a robust food production system, nor for the viability of rural economies nor for continued growth in consumer choice in the marketplace.

Second, the decline in numbers bodes ill for political leverage as Congress gets set to consider another farm bill. It’s tough to muster support for the costs of a strong farm safety net to helps ensure continuation of family farm and ranch productivity when the numbers of such participants is no longer as meaningful come election season.

But most importantly, when farm gate income as a share of food costs—and let’s not forget that farm and ranch families need to buy groceries, too—continues to stagnate at best, it threatens our national food security. Not only is food production vital to the larger economy—food as an overall sector is the largest employer in the country—but of all the basic needs that must be ensured to protect the health and safety of American public, provision of an adequate, affordable food supply is near the top of the list.

Of course, that’s the list that we refer to only in a crisis. When the grocery shelves are stocked and there’s no foodborne outbreak to force us to consider how thin our food supply lines really are, we blithely continue on with little interest in investing in food security.

Indeed, the next farm bill is likely to be a battleground, given the current congressional climate regarding spending. For those hot steeped in the intricacies of ag economics, farm policy is as dusty and dry as a West Texas feedlot. But it precisely those policies, and the funding necessary to support all sectors of food production, that must be continued if we’re to maintain a healthy farm sector.

Unless we want to start paying even more for food, while the produces and growers who actually produce that food continue to get a raw deal for their efforts.

Dan Murphy is a veteran food-industry journalist and commentator

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