Thursday, October 28, 2010

Agriculture in the News

There have been a few news stories concerning agriculture recently that caught my attention. The first one was an unfortunate analysis by a contributor to CNN news that predicted dire outcomes for U.S. food prices because of the high prices of commodities, It made me so mad I wanted to throw something at the TV. Unfortunately, I was in the hot tub at the time, and I was afraid of getting shocked if I splashed too much water.

In fact, there's a website out there called The End of the American Dream, which basically claims the world is coming to an end because of high food prices, and it's all the fault of the American Farmer who is making so much money. So how about some truth?

When field corn is priced at $2.28 per bushel (the 20-year average), the actual value of corn represented in the box of corn flakes is about 3.3 cents (1 bushel = 56 pounds). (The remainder is packaging, processing, advertising, transportation, and other costs.) At $3.40 per bushel, the average price in 2007, the value is about 4.9 cents. The 49-percent increase in corn prices would be expected to raise the price of a box of corn flakes by about 1.6 cents, or 0.5 percent, assuming no other cost increases.
Or how about this:

Currently, about 4.1 percent of U.S.-produced corn is made into high-fructose corn syrup. A 2-liter bottle of soda contains about 15 ounces of corn in the form of high-fructose corn syrup. At $3.40 per bushel, the actual value of corn represented is 5.7 cents, compared with 3.8 cents when corn is priced at $2.28 per bushel. Assuming no other cost increases, the higher corn price in 2007 would be expected to raise soda prices by 1.9 cents per 2-liter bottle, or 1 percent.
And it's the same with bread:
More than 80 percent of the retail cost of a loaf of bread or a box of pasta is attributable to transportation, processing, marketing, packaging and labor costs. These are the primary factors currently increasing consumer costs. To put this in its proper perspective, a family consuming one loaf of bread and one box of pasta per week would incur an additional annual outlay of roughly $20 per year due to the increased cost of wheat and durum in the finished product.
Now to put all of tht in perspective, here's an estimate from 2009 on the cost to produce a bushel of corn.
Taking all these uncertainties into account, the preliminary estimated costs of production for continuous corn are $5.40, $5.10, and $4.88 per bushel. For expected yields of 125, 145, and 165 bushels per acre, respectively. For the medium yield, the 2009 estimated costs are 22 percent higher than last year for continuous corn. They are 67 percent higher than 5 years ago.

The estimated costs of production per bushel for corn following soybeans are $4.48, $4.32 and $4.21 assuming 140, 160, and 180 bushels per acre, respectively. These cost estimates are, for the medium yield, 24 percent higher than last year’s estimate and 68 percent higher than the 2004 estimated costs.
Granted, the costs have gone down somewhat to produce the 2010 crop, but to put it in perspective, corn prices reached a two-year high on October 13 of $5.88 per bushel. Wow, it doesn't sound as if the farmers are making much money, and the money that they are making doesn't really have that much impact on the prices you pay for food.

The American Farmer - the only businessman who buys retail, sells wholesale and pays the freight both ways.

The other two articles were both from USA today and the first concerned how the vertical integration of the meatpacking industry is hurting both the ranchers and the consumers. When I was growing up, our calves were trucked to market in the fall and sold at the sale barn, or possibly we fed them ourselves after weaning and then they made the trip to town. Competitive bidding resulted in the highest prices available. Now, producers are lucky if they have ONE bid for their cattle, a fact that may point to possible collusion among the large meat packers. Either way, it means ranchers are making less money, and consumers are getting poorer meat for their tables.

The other article concerned catfish farming. Once a lucrative business, cheap imports of dubious quality are driving the prices down so far, that hard-working farmers are no longer able to make a living producing catfish. What's more, there are serious food-safety issues with imported catfish, given the lack of any types of quality controls in the nations producing it.

The American Farmer isn't the enemy here. They are hard-working salt-of-the-earth, backbone-of-our-nation people who deserve to be well paid for the job that they do - producing the highest quality food possible for us to put on our tables. It would be nice if they weren't vilified in the press for making a little bit of a profit, or for receiving government subsidies designed to keep food prices down, and if they didn't have to compete against cheaper, lower-quality imports, or fight for fair prices from the large meatpacking companies.

Thanks for stopping by. The coffee is always on.