Friday, April 11, 2008

Don't Blame the Farmer

We hear lots today about rising food costs in America and people's blame sometimes turns to our farmers. But, won't many Americans don't realize is that the USA spends the least amount of its incomes on food, compared to the rest of the world.

Here is an article from the Springfield News Leader that I found interesting from Charles Kruse, President of Missouri Farm Bureau and a fourth generation farmer from Stoddard County.

Don't Blame the Farmer

Much is being written and said today about rising food costs. It can't be denied ... poultry, milk, meat and other agricultural products are increasing in cost, up about 5 percent in Missouri during the last few months. Farmers, however, are not the ones receiving a majority of the extra money consumers are spending.

According to the United States Department of Agriculture, farmers receive 22 cents of every $1 consumers spend on food (which is down from 47 cents in 1950 and 31 cents in 1980). The other 78 cents goes primarily for processing, packaging, transporting and retailing the food.

Obviously these costs are going up faster than the agricultural products themselves.

But don't assume the 22 cents farmers receive represents their profit. Farmers use the proceeds from their sales to pay for fertilizer, fuel, farm machinery and other expenses, some of which have increased 300 percent this decade alone. Only after these expenses are paid can farmers determine their profit.

According again to USDA, 3.5 percent represents the average farmer's profit on all his gross receipts. So do the math ... out of every $1 consumers spend for food, 22 cents represents the portion farmers receive; however, less than 1 cent represents the farmer's profit (3.5 percent x 22 cents). This 1 cent is the farmer's "take home pay" used to support a family, provide housing, pay for college, put food on the table and pay for other living expenses. It is often said that farmers, unlike many other businesses, are "price takers, not price makers."

Most farmers and ranchers are unable to set a price for their commodities; they accept the market price regardless of whether that price will provide them a profit. That itself makes it a risky business, not to mention weather uncertainties, foreign competition, government regulations and market cycles.

Food prices are increasing but don't blame our nation's farmers. In fact, be mindful the percentage of disposable income Americans spend for food is still the lowest in the world, and the quality, availability and safety of the American food supply is unparalleled.

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