LADOGA, Ind. — USDA recently announced the average farmer is receiving less than 15 cents on average for every dollar consumers spend on food – the lowest farm share since 1993. That is the kind of news that makes some farmers frustrated, maybe even angry.
It’s not the first time Adam Moody, owner of Moody Meats, Inc., has gotten frustrated. In the late 1990s, he was selling hogs for just 9 cents per live weight pound, and he remembers not being able to afford a ham at the local grocery for Easter dinner.
“That’s what made me angry. Somebody was making money, but it was not me,” Moody told Farm World last week.
Many pig farms closed up shop during that time, but he took a different route and now butchers local Hoosier meat for direct-to-consumer sales in four locations in Indiana: Ladoga (his home farm), Fishers, Zionsville and Avon. A fifth location in Indianapolis is for dry aging and processing.
Moody said his meat suppliers from local farms make on average about 64 cents per retail dollar – a far cry from 15 cents.
The National Farmers Union (NFU) reports monthly on the farmer’s share of the retail food dollar, which tracks USDA’s farm share for 15 popular food items. The latest monthly data show that beef producers receive 68 cents from one pound of bacon that sells for $4.99 in stores, and $2 from one pound of top sirloin steak, retailing for $8.99.
For foods requiring extra processing, the farmer receives an even smaller percentage. According to NFU, a box of cereal retails at $5.09 but only pays the farmer 5 cents. Two pounds of bread sells for $3.49, with the farmer’s share being just 12 cents. The farmer receives 4 cents from a six-pack of beer that costs $8.99.
“We compare the USDA data to the retail price and consider the amount of the farm product in the food item,” explained Andrew Jerome, NFU communications director. “Farmers receive a low share of the retail food prices. Whether it’s good times or bad, the trend is not positive for farmers.”
Who is making more than 80 cents from the food dollar? That would be the off-farm food chain, which includes marketing, processing, wholesaling, distribution and retailing, according to USDA.
Foodservice receives the largest share at 36.3 cents, followed by food processing at 15.2 cents and retail trade, at 12.4 cents.
NFU President Roger Johnson said the new low, which is 5 percent less than the year before, speaks to the state of the farm economy, corporate control of the food system and the need to prioritize family farm agriculture in national policymaking.
“This figure strikes a chord with family farmers and ranchers who are dealing with the sharpest decline in net farm income since the Great Depression,” he said. “The prices that farmers have been receiving for their products aren’t paying the bills, and too many are being forced to give up farming.
“Our nation needs a dramatic, progressive movement towards ensuring family farmers can receive a fair price from the marketplace. Otherwise, we’re going to continue to lose too many of the family farmers and ranchers who feed, fuel and clothe our country, steward our nation’s land and power our rural communities and economies.”
In general, however, most economists agree that lower commodity prices, caused by a surplus of milk, corn and soybeans, are responsible for the reduced farmer share in the short term.
Long-term, other factors can account for the farmer’s lessening share of the food dollar. Increasing demand for processed foods in the last 50 years adds to the overall cost of the food product, reducing the farmer’s share of the profit. Cereal, pizza and ready-to-eat products require more processing and therefore more distribution of cost and profit.
This does not necessarily mean the farmer receives less money for their product.
In addition, people are eating out more. USDA reports that more than half of all consumer food dollars are spent at restaurants, cafes and other foodservice providers. In 1994, 44.3 percent of all food dollars were spent while people dined out.
“When consumers eat out, the percentage of the food dollar going to farmers decreases,” said Bob White, director of national government relations for Indiana Farm Bureau.
More of the food dollar goes to pay for service, food preparation and the dining experience, he explained. Conversely, eating at home pays the farmer more for each dollar spent.
Legislatively, Farm Bureau believes that crop insurance and safety nets are the best remedy for farmers. As the 2018 farm bill is debated, those will be sticking points for the organization.
Direct-to-consumer markets may be the best way for farmers to have more control over their prices and increase their share of the pie. But they may not suit every farmer or rancher.
“If you sell your product commercially, you have no control over price. You can do something about it if you choose, but it will require a different style and method of farming, more interaction with the consumer. Some introverted farmers may not like that,” White said.
Moody said farmers need to pay more attention to their profit margins than their production numbers. Larger production numbers simply put more pressure on commodity prices, he said.
“We need to get more margins off our acres, not more bushels of No. 2 corn. We need to chase margin over production. I’m not bashing Big Ag. I’m chasing margin,” Moody added.