A Publication of WTVP

These news statements, and many more like them, imply that the higher commodity prices farmers are currently receiving are causing the prices of groceries to increase. In a small way, this is true. Food prices are up an average of four percent, compared to the 2.5 percent average annual increases they’ve experienced over the past decade.

On March 15th, the Peoria County Farm Bureau sponsored a breakfast at the Knights of Columbus Hall in Peoria, and more than 1,000 attended. Customers were charged the “farm” value of the breakfast—just 65 cents—for a menu including two pancakes, two two-ounce sausage patties, two scrambled eggs, an eight-ounce glass of milk and an eight-ounce glass of orange juice. The retail cost would be seven to 10 dollars.

The farm value of the ingredients was remarkable. The corn in the syrup for the pancakes was 2 cents, the wheat in the two pancakes was 8 cents, the two whole hog sausage patties were 11 cents, the two eggs were 25 cents, the eight-ounce glass of milk was 10 cents and the eight-ounce glass of orange juice was 9 cents.

The Farm Bureau has sponsored this breakfast with the same menu items since 2001, always charging customers the “farm” value of the breakfast. The following is the cost of the breakfast in each of the past eight years:

2001…..44¢        2005…..40¢
2002…..45¢        2006…..45¢
2003…..45¢        2007…..50¢
2004…..55¢        2008…..65¢

As you can see, the cost for the breakfast witnessed a low of 40 cents in 2005 and a high of 65 cents this past year. That’s a 25-cent price fluctuation for the “farm” value of a breakfast.

My point is this: If you’ve seen an increase in your grocery bill, only a small percentage can be attributed to the higher prices that food processors are paying for the raw commodities in those grocery items. A significant portion of the food marketing dollar covers transportation and energy costs. All of us are paying more at the pump for gasoline and diesel. Food companies are forced to eat record-high energy costs or pass them on to consumers.

There are a number of other factors associated with higher food prices here in the United States, including the weakened U.S. dollar. Many of our grocery products come from overseas or across borders, especially when the item is out of season in the U.S. A weaker dollar means that the imported food we demand year-round, such as Chilean grapes or Columbian coffee, cost more than ever. As an example, instead of one U.S. dollar buying one pound of Chilean grapes, it may now take $1.25 of U.S. currency to pay for that same pound of grapes.

We are all concerned about increasing food prices, but such increases cannot be attributed solely to the higher prices of commodities. IBI