Thursday, November 27, 2008 6:09 PM CST
Oil's under $50; corn's under $3.50; so what's up with food prices?
By the ILLINOIS FARM BUREAU, For the JG/T-C
We’re waiting.
Farmers are waiting for the price of food to fall because all we ever seemed to hear about earlier this year was how ethanol production was causing to out-of-control food price increases.
“Skyrocketing” was the adjective the pundits seemed to like to throw around the most.
Some documents surfaced in Washington D.C. showing that it was the grocery manufacturers who were putting a bug in the ear of the national news media. No matter which network you watched last spring, the talking heads couldn’t seem to stop blabbering about the “unintended consequences” of ethanol policy.
After all, corn prices were rising, food prices were rising, people in third world countries were rioting, and ethanol had to be the culprit.
Talk about being in the wrong place at the wrong time.
In April, an ear of (sweet) corn with husks of $100 bills made the cover of Time magazine with the headline, “The Clean Energy Myth.” Offensive editorial cartoons were printed depicting farmers behind the wheel of ethanol-powered SUVs running over starving children.
Not inclined to look into the real reasons behind the cause of food price increases, the media elites took their spoon fed story from the grocery manufacturers and indignantly asked: “Why are we burning our food in our gas tanks, anyway?”
We argued, and still do that clean burning, domestically produced ethanol must be part of our national energy solution. And that we have plenty of corn for food and fuel. We emphasized that one out of every three bushels of corn that goes into ethanol production comes out as high protein livestock feed.
We talked until we were blue in the face about the farm value of the corn being such a small part of the overall cost of the food we buy at the store. On average, farmers receive just 20 cents of every retail food dollar spent by consumers. For highly processed foods, the farmer’s share is much smaller.
Here are some examples at $7 per bushel corn.
n The farm value of corn in a gallon of milk is less than a quarter (22 cents).
n The farm value of corn in an 18 oz. box of corn flakes is a dime.
n The farm value of corn in a pound of chicken is 33 cents.
Now slice each of those farm values in half, because over the past few months the price of corn has plunged to nearly $3.50 per bushel.
So, you ask, what about the remaining 80 cents of the consumer’s retail food dollar?
That’s pays for the labor on the other side of the farm gate, for all of electricity used in processing, for all of the transportation costs of shipping raw materials and finished products, and for all of marketing and advertising costs, not to mention the profit margins at the wholesale and retail level.
The price of energy is one of the biggest components of food prices. Economists say energy prices were three times more responsible for the boost in food prices than commodity price increases. International demand, weather problems, and the cheap dollar also contributed.
Now the price of oil has dropped like a brick — from $147 per barrel to under $60 for the first time since early 2007.
But somehow the grocery manufacturers haven’t noticed. Or maybe they’re hoping that with the election and all we’re not paying attention.
The government says food prices went up eight percent on an annual basis between last September and this September. In the meantime, several food companies have announced healthy quarterly profits.
Either ethanol production and commodity prices are the reason behind higher prices are the grocery store or they’re not.
If the grocers still want to claim that they are, then it’s time to dramatically lower food prices.
If there’s something else behind the food price increase, then the big food companies owe farmers an apology.
Which is it?
We’re waiting.
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Techno-less wrote on Nov 30, 2008 5:43 AM:
They also hope we won't notice that packaging is getting smaller. I bought baking soda the other day that was half the size of the one purchase previously but sold for the same price. There is more than one way to increase prices.
At this point allow me to present a "jeer" to a major area chain store that has been experiencing the corporate decision results of dropping many store brands thereby forcing shoppers to purchase the more expensive name brand items. For example, just try to purchase the store's brand of Ramen noodles at ten cents each. You can't. The store brand is gone, but you can purchase a name brand for sixteen cents. As a matter of fact that is the only brand you can buy. That company must be paying corporate a mighty fine incentive to eliminate all competition.
Walk through the store and see how many store brands are gone and how many fewer choices there are. It doesn't work with me, though. These items simply got added to my list of things I find somewhere else. It won't be too much longer before I won't be shopping there at all.
That store started speeding up on its downhill slide when they eliminated lay-a-way in order to get customers to sign up for its credit card instead. I haven't bought more expensive items there since. I now save the money then purchase them elsewhere. I don't believe in credit cards. I pay cash and keep all the interest and fees in my own pocket. "