Who Gets Your Grocery Dollar?

Whatever happens day to day with food prices, farmers are getting a smaller share of each dollar than they did a generation ago.

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We’ve all noticed the lower prices at the grocery. The number of items discounted has spread and now the little “sale” signs spread from one aisle to the next in even the fanciest stores. Stuff that was sky-high this time last year is now on special. 

The Washington Post reported Thursday morning that Safeway has cut prices by as much as 25 percent in the last months. Giant Food in the Washington, D.C. area has doubled the number of items it has on sale. “The heated competition is being fueled in part by the steep decline in commodity prices after a year of dramatic increases, one of the few silver linings of the deep recession that continues to transform the economy,” report Ylan Z. Mui and Neil Irwin. http://www.washingtonpost.com/wp-dyn/content/article/2009/09/16/AR2009091603540.html

Consumer food prices have been dropping since last November, according to the Bureau of Labor Statistics. But what relationship does that have to the price paid for food in rural communities at the farm gate? It’s impossible to tell now, according to the U.S. Department of Agriculture. But one thing is clear: For the past 50 years, farmers and farm communities have been taking an ever-smaller share of the food dollar. Whatever is happening to prices on the grocery aisles, you can bet that little of the increase is reaching the people who grow the food.

One reason farmers are getting a smaller and smaller percentage of the food dollar goes to farmers is that Americans have bought an increasing amount of their meals at restaurants. In 1963, 24% of every food dollar was spent on meals prepared outside the home. In 2007, Americans spent 41% of their food dollars on meals prepared outside the home. More of each food dollar is spent for preparation. (See chart above.)

That doesn’t tell the whole story of why the rural share of food is diminishing. The decline in farmers’ share of the food dollar, however, has been dramatic. In 1950, farmers (and, in turn, rural communities) took in 41% of each dollar Americans spent on food. By 2006, farmers were down to 19%. 

Farmers received more than 40% of each dollar spent on tomatoes as late as 1992.

Higher commodity prices in the last few years have helped farm income — in 2007, farmers took in 21% of all food dollars — but those prices have collapsed of late. The price of corn is down 56% since July 2008, for example.

And the long term trends are clear: less and less of each food dollar is sent to the people who grow crops or raise livestock.

The figures differ from crop to crop, but the trends are always the same: The farm share of food income is either stagnant or shrinking. For example, in 1992, farmers got about 41% of each dollar spent on tomatoes. By 2008, it was down to 29%. 

Farmers have seen their share of the baked goods and cereal dollar fall for the past 30 years.

Farmers received a quarter of each dollar spent on cereals and bakery goods in 1974. By 2002, it was five percent. Despite soaring commodity prices for grains, the farmer share of the food dollar in this category reached only 10 percent in 2008.

In other words, there’s little relationship between what you pay for food at the checkout counter and what farmers receive when they sell their product.

 

Topics: Ag and TradeFood
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