While food prices at the grocery store have indeed risen, this increase remains far lower by comparison than the skyrocketing jump farmers and ranchers are paying for input costs.
The reason for today?s upward pull on retail food prices is in large part because of higher energy and transportation costs, increased U.S. exports resulting from a weaker dollar and rising labor and health care costs. Higher commodity prices for corn, wheat and soybeans, to name a few, are also part of this equation.
Still, farmers don?t share proportionately in this increase at the grocery store and they certainly don?t have a say when it comes to what they must pay to produce their crops and livestock.
So where does the average American consumer dollar spent on food go?
Here?s the current beakdown.
Profits make up 4 percent. Depreciation and repairs account for 5 percent. Interest totals 6 percent. Taxes and other costs are 6.5 percent. Labor amounts to 38.5 percent. Energy and transportation is 8.5 percent. Advertising and packaging is 12 percent and the farm value is 19.5 percent.
Still, food prices are a great buy and without question, the wise shopper must be knowledgeable when spending her or his hard-earned dollars.
Looking at the cost of a handful of typical items in a grocery cart, cornflakes for example, there is about 12.9 ounces of milled corn in an 18-ounce box of this cereal, according to the U.S. Department of Agricul?ture?s Economic Research Services.
?This is expected to raise the price of a box of cornflakes by about 1.6 cents of 0.5 percent,? according to Terry Francl, senior economist at the American Farm Bureau Federation.
If you look at soda and the corn syrup in a two-liter bottle, it contains about 15 ounces of corn in the form of high fructose corn syrup. With the increase in corn at this time, the price of soda will increase by 1.9 cents per two-liter bottle or 1 percent, according to the USDA.
Turning to poultry increases at the supermarket, a pound of retail chicken uses 10.6 cents worth of corn (chicken feed) or about 5.2 percent of the average retail price of chicken breasts.
Using the average price of corn for ?07 and assuming producers do not change their animal feeding practices, retail prices would rise 5.2 cents or 2.5 percent, according to USDA?s Economic Research Services.
Using the same corn data, retail beef would go up 14 cents per pound, or 8.7 percent, while pork prices would increase 13 cents per pound or 4.1 percent.
Although ethanol is sometimes blamed for higher food costs, what is not taken into consideration is that ethanol has helped lower both farm program payments and gasoline prices, Francl adds. He estimates farm program payments have been reduced as much as $12 billion and that gasoline costs have been reduced as much as $14 billion because of ethanol.
This is a $26 billion savings for taxpayers and consumers or the equivalent of a 2-percent change in the food consumer price index.
U.S. consumers spend less than 10 percent of their disposable income on food products they eat. The price they pay for home supplies, cigarettes, videos and just about anything else you can cram into a shopping cart is another matter and should not be confused with food.
This country remains blessed with the most affordable, healthy food anywhere on the planet. We are fortunate to spend as little disposable income as we do on the food we feed our families.
John Schlageck is a leading commentator on agriculture and rural Kansas. Born and raised on a diversified farm in northwestern Kansas, his writing reflects a lifetime of experience, knowledge and passion.
