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%.
- 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.