Texas farmers and ranchers pay more at the grocery store, just like everyone else. We see the higher cost of food.
The numbers tell the story. Grocery prices jumped 1.4% in February and 8.6% over the past year, the Bureau of Labor Statistics reported.
Do the increases seem a little high to you? They were. The monthly increase was the largest in about two years, but the 12-month increase was the largest since the period ending April 1981.
All of this contributed to an overall rise in the consumer price index of 7.9% over the past 12 months, also the largest in 40 years.
Dollars are stretched. It’s not an easy time for anyone.
The common assumption is that farmers and ranchers must take advantage of higher grocery prices.
For every dollar American consumers spend on food, American farmers and ranchers earn just 14.3 cents, according to the latest report released recently by the US Department of Agriculture’s Economic Research Service.
The farm share of the food dollar is the share that farmers receive from sales of raw food products. The marketing share (85.7 cents) is the remainder going to food supply chain industries involved in all post-farm activities that culminate in final dollar food sales in the marketplace.
The increase in food prices we are currently seeing at the grocery store reflects higher spending in the food supply chain beyond the farm and ranch. The increased costs range from energy to labor to raw materials.
Always remember that entities beyond the farm and ranch can pass on their higher business costs to the consumer.
Farmers and ranchers cannot.
The higher costs of fuel, fertilizer, water, equipment, seeds and crop protection chemicals paid by the farmer and rancher are absorbed by the farmer and rancher. Thin profit margins shrink as each price increase is absorbed.
President John F. Kennedy’s quote still holds true nearly 60 years later: “The farmer is the only man in our economy who buys everything retail, sells everything wholesale, and pays freight back and forth.
This is a perilous time for American agriculture. Production spending is expected to rise 5.1% this year. This follows a 9.4% increase in nominal spending in 2021.
Some production inputs, such as fertilizers, are priced 200-300% higher than a year ago.
Extremely high costs are not sustainable. How many companies can absorb these types of raises?
As an agricultural economics graduate from Texas A&M University, I understand the financial dynamics and risks of modern agriculture. But it doesn’t get any easier to withstand the headwinds of today’s economy.