Minnesota Farmer

Where your food dollar goes

There has been a bit of rumbling the last few years about how ethanol production has caused corn, and thus food prices, to go up, and “greedy” farmers are at fault.  Then today I read this in the Washington Post;

“The U.S. Department of Agriculture report released last month that broke down where each dollar spent on groceries goes. Farmers received an average of 11.6 cents per dollar in 2008, the latest year data was available. That was down from 13 ½ cents 10 years ago and from 14 ½ cents in 1993, the USDA report showed.

The rest of the money goes to processing, packaging, transportation, retail trade and food service, which includes any place that prepares meals, snacks and beverages for immediate consumption including deli counters and in-store salad bars. The share going to each category has declined some, except for food service which now gets 33.7 cents of every dollar spent, the USDA reported.

“While the commodity and food prices have been going up, the share going back to the farmer has been going down,” said Chad Hart, an agricultural economist at Iowa State University.

As our food prices go up, the farmer gets paid a smaller and smaller percentage of that food dollar.  So if corn prices are at near record levels, why are farmers not getting a record percentage of our food dollar.  The fact is that despite the assertion that everything we eat has corn in it, which is not true, corn is really cheap in a historical perspective.

Back when I started farming, you could buy a cup of coffee or a candy bar for five cents.  Corn prices then were at about a dollar and corn farmers in my area produced about 100 bushels per acre.  Today that same cup of coffee or candy bar will cost you about a dollar, and corn is priced at under five dollars for a yearly average and area corn farmers are producing over 180 bushels per acre.  That means your cup of coffee or candy bar have gone up 20 times while the corn price has gone up five times.  If corn prices had held pace with coffee and candy we’d have $20 corn now.  We’d also have a lot more families still on the farm.

Thankfully we don’t have $20 corn now.  If we did we would not be able to afford the steak, pork chops and chicken nuggets we all love.  We’d be eating cabbage, rutabaga, turnips, potatoes and beets, bread prices would also be out of sight.  Using corn to produce ethanol for fuel would be out of the question, and we would be spending closer to half of our income for food instead of less than 10%.  Just think of all the things you would have to go without, and all of the jobs making those things that would be lost.

It is so easy to see prices going up and get scared that we will not be able to afford our food tomorrow, but we still live in the country that spends the smallest amount of our paycheck on food.  The rest of the world would like to join us, and as they get better jobs they are starting to compete for the fine food we take for granted.  We’ve had life too good for too long, if we are going to keep the good life, we need to get out there and earn it again.  You can’t make the price of food go down by complaining about it with your mouth full.


2 Comments so far
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So Mike, I definitely understand, growing up on a farm and having farming friends, where you are coming from. I just always wonder about the “Entitlements.” You listen to KDOM in the am and they tell how you should sign up for such and such a program. My dad was always against “programs” and fought against people using them…then they have the right to tell you how to farm. So much of the nutritional programs, for the poor or schools are based off of what the government subsidizes. Then there are things like the cotton program which is INSANE.We have agreed to pay Brazil Billions of dollars, rather than reduce US subsidies to us cotton farmers.
Not only are we paying US cotton farmers, we are paying Brazils cotton farmers.

somewhere along the line so much was lost and we wonder why we are in a deficite.

Comment by Lynn Peterson

Yeah, I don’t approve of them either. Most of the Agriculture budget goes to the food stamp program. Why is that?
It seems Americans have voted themselves so much more than they can afford. Just Medicare, Medicaid, Social Security and the interest on the debt take up all of the money that are paid in taxes. What do we cut? One mans pork barrel program is another man’s lifeline. Do we dump them all? Then when governments get busy and balance the budget, as they are supposed to, we have people marching on the state house. There are not enough “rich” people to pay for all of the things that we are “entitled to” anymore.

Comment by Michael

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