As much as I believe in the merits of our agrifood system, our grocery bill has become more painful.  They want how much for those eggs and that gallon of milk?  My urban and suburban friends have asked a number of times in the last year about why food costs so much.  “It must be farmers getting rich” or “Ethanol is sure driving up the price of everything” are the typical comments.

Well, I’m not an economist, but it doesn’t take one to do the math on the food dollar.  The Economic Research Service reflects the farmer gets only $0.19 of each food dollar, meaning 81% of the costs are off the farm.  If anyone wants to explain the scale of farming these days, try this one on for size; farmers received $0.30 of the food dollar back in the 70s.  Add up the differential and you have a lot of hard working farms producing more food than they ever have for less money.

Here’s how the food dollar breaks down – it’s a great wake up call to those who don’t know what small portion goes to the farm gate.  In my experience, that’s the majority of the population – including a lot of folks in our business.  I suggest you spend a bit of time with your neighbors, elected officials and even input suppliers to be sure they understand clearly how the food dollar breaks down.  The $0.81 that goes off the farm is as follows:

  • Labor: 38.5¢
  • Packaging: 8¢
  • Profits: 4.5¢
  • Rent: 4.5¢
  • Transportation: 4¢
  • Advertising: 3.5¢
  • Energy: 3.5¢
  • Depreciation: 3.5¢
  • Business taxes: 3.5¢
  • Other costs: 3.0¢
  • Interest: 2.5¢
  • Repairs: 1.5¢

All of this can be found at http://www.ers.usda.gov/Briefing/FoodMarketingSystem/ – along with more information than you’ll likely ever need.  The U.S. is seeing a lot of economic challenges right now and it’s likely to get worse with projected food and fuel price increases.   The rising food prices may actually garner attention for agriculture if we choose to proactively position ourselves.

As for the eating versus ethanol debate, we’ll get into that next time…

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