Posted: Thursday, May 05, 2011 10:00 AM
While rising corn prices are wreaking havoc with livestock feed prices, agricultural economists in the Midwest say robust commodity prices aren't responsible for food inflation rates that have doubled in the last year.
Corn and wheat are trading for more than $7 a bushel. Soybeans are fetching better than $13.50, and sugar prices are up more than 40 percent from a year ago. Cattle prices have also made healthy gains.
That's good news for farmers, but at the same time consumers have seen prices at the grocery store rise ever higher. In most years, food inflation -- the annual increase in food prices -- averages about 2 percent. Corinne Alexander, an agricultural economist from Purdue University, predicted food inflation will average between 4 and 4.5 percent this year.
"We are going to enter that world again where folks are getting squeezed and they want an explanation for it," she said.
But Chad Hart, an ag economist at Iowa State University, told The Associated Press that consumers shouldn't hold farmers and ranchers responsible for that increase.
"It's a whole slew of things that have influenced that price," Hart said. "When you look at the cost of our food, it is related to the cost of corn, soybeans and wheat and cattle but also the cost of oil, gas, diesel and unrest in other parts of the world."
The USDA keeps track of the amount of each food dollar that flows back to farmers and ranchers. The data runs a couple of years behind, so the last year for which figures are available is 2008. In that year, farmers received just 11.6 cents on the dollar. That's down from 13 cents 10 years ago, and from 14 cents in 1993.
Ninety percent of the retail price goes to processing, packaging, transportation, marketing, and the markup taken at each stage in the food distribution system.
"While the commodity and food prices have been going up, the share going back to the farmer has been going down," Hart said.
Unfortunately, most of what happens between the farm and the grocery store is invisible to shoppers, who too often find it easy to blame farmers and ranchers.
It's difficult, particularly when commodity prices are relatively high, to convince consumers that farmers are price takers, not price makers. And that when it comes to a trip to the store, farmers and ranchers pay the same retail, and the same markup, as everyone.