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The farmer's sliceBy Holly Martin A frozen pizza rings up $6.79 at the checkout at the grocery store. Let's cut that pizza into 10 slices. The sale of only two of those slices go to the farmer. Rising energy costs mean a whole slice goes to transportation and energy. Five slices are for marketing and advertising, including labor. But the recent endless stories about high food costs always seem to tie the rising costs with high commodity prices. Yes, retail food prices recorded the highest gains in 2007 in nearly 20 years, according to a report by the Federal Reserve Bank of Kansas City. But higher commodity prices played just a part. Marketing costs have risen dramatically over the last 50 years, the report found. Rising labor costs are the biggest component. As times have changed, people have demanded more highly processed foods. Transportation and energy costs are expected to continue throughout 2008. A 10 percent gain in energy prices could contribute 5.2 percent in retail food prices, the Federal Reserve found. Farm values of retail food costs average only 19.5 percent of the total. That makes the farmer's share of that frozen pizza $1.32. So perhaps the stories about the high cost of food as it pertains to the high commodity prices, might be a bit out of proportion. Certainly, higher prices have gotten a lot of attention. The American Bakers Association recently suggested that the government intervene in the "commodity crisis" including releasing CRP acres, elimination of the ethanol import tariff and a review of the wheat export policies. ABA members are obviously feeling the crunch and that's understandable. Cattlemen are feeling the hurt too. Their feed costs have skyrocketed. But, taking such drastic measuraes is not necessary. The Federal Reserve report suggests that we are moving to a new era of higher food prices. Demand for farm commodities is rising faster than existing production capabilities. Part of the demand is due to growing global population and their rising income. With that new level of food prices, the market will take some time to adjust. When it does, let's hope there is profit for each segment of the food industry. Everyone wins when that is the case. But let's not blame the higher cost of a frozen pizza on farmers alone. Holly Martin can be reached by phone at 1-800-452-7171 ext. 1806 or e-mail at hmartin@hpj.com. 3/31/08 Date: 3/26/08 Advertisement
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