|
|
|
CAWG: Don't blame the farmer for higher food pricesColorado Higher pizza prices, higher bagel prices, higher bread prices--according to many news stories, high wheat prices are to blame. Colorado wheat farmers are feeling unfairly blamed for the rising cost of groceries, according to the Colorado Association of Wheat Growers. Farmers have no control over wheat prices. Prices are controlled by the commodity market, which is driven by supply and demand. Wheat stocks have dropped to the lowest levels in years, and therefore the price paid for the wheat that is available has gone up. Most farmers sold their wheat last fall at harvest for $5 per bushel. Very few sold wheat at record high prices this spring. Exactly how much wheat is a bushel of wheat? A bushel is 60 pounds of wheat. At $10 a bushel, the farmer receives about 17 cents per pound of wheat. Would you be willing to sell something that you grew in your garden for 17 cents a pound? Ten dollars per bushel wheat represents about 15 cents in the cost of a one pound loaf of bread. Many factors go into food prices, not just the cost of wheat. A report from the Federal Reserve Bank of Kansas City states that "marketing costs" drive retail food prices. Marketing costs, including packaging, advertising, transportation, and wages and benefits for bakery employees have far more of an effect on the price of bread than the price of wheat does. The marketing cost accounts for 80 percent of overall food prices. While commodities do fuel food price gains, they only accounted for six percent of retail cereal and bakery costs. Consumers pay about one additional penny for each dollar the per bushel price increases. If the farmers aren't all getting rich, then why are the prices so high? Higher demand: The "middle class" outside of the U.S. is expected to double by 2020, and is approaching one billion households. When families in developing countries increase their income, their food consumption goes up, and they seek better sources of protein. One of these sources is wheat. Lower supply: There have been critical shortfalls in major wheat exporting countries. Drought, flooding, and plant diseases all affect the wheat supply. Low U.S. dollar: With the U.S. dollar lower in value than the currency of many other countries, it is economical for these countries to buy wheat from the U.S. right now, even at historically high prices. Here in America, we spend only about 10 percent of our income on food. China pays 26 percent, France pays 15 percent, and Japan pays 14 percent. Farmers may make more net profit this harvest if prices are still high, but their costs of farming have also gone up. Oil prices have driven the cost of running tractors on diesel fuel. Costs for fertilizer and chemicals have gone up because those products are derived from oil and natural gas. The costs of farming have gone up much more quickly than the prices paid to farmers. 4/21/08 Date: 4/16/08 Advertisement
Copyright/Privacy
Copyright 1995-2009. High Plains Publishers, Inc. All rights reserved. Any republishing of these pages, including electronic reproduction of the editorial archives or classified advertising, is strictly prohibited. If you have questions or comments you can reach us at High Plains Journal 1500 E. Wyatt Earp Blvd., P.O. Box 760, Dodge City, KS 67801 or call 1-800-452-7171. Email: webmaster@hpj.com |
Market Snapshot Inside Futures |
