Capital Press: Farmers served smaller sliver of consumers' financial pie

Consumers buying groceries have noticed food prices have risen, a lot of it due to increasing energy and transportation costs.

Even with the price of food increasing by 2.4 percent last year and another 3 percent increase expected this year, the USDA continues to reassure consumers they receive a real bargain, thanks to the food producers in this country.

The department's Economic Research Service recently reported that 9.9 percent of Americans' disposable income is spent on food, up from 9.7 percent in 2004.

However, putting it into perspective, it had dropped below 10 percent for the first time in U.S. history in 2000.

"Twenty years ago, American consumers spent 11.7 percent of their disposable income on food. Thirty years ago, that figure was 15.1 percent. Going back in history, Americans spent about 20 percent of their income on food about the time today's baby boomers were born. In 1933, the figure was more than 25 percent," said Oregon Department of Agriculture in a news release.

But Americans remain extremely fortunate compared to other countries, such as China where 28.3 percent of disposable income goes to food, India 39.4 percent, Russia 36.7 percent and Mexico 21.7 percent.

USDA said Americans spent more than $895 billion on food in 2005, compared to just $11 billion in 1933. Higher populations, but also higher productivity are credited for the increase.

"Better equipment, mechanization, use of hybrid seeds, fertilizer and crop protectant chemicals have all contributed to increased production in the U.S., which has lowered the cost of food to the public," said Brent Searle, an analyst for ODA. "That has allowed 90 percent of the American consumer's disposable income to be spent on things other than food, such as housing, automobiles, leisure and recreation."

It is not a surprise to farmers, however, that most of that money spent on food isn't going into their pockets. In fact a shrinking proportion of the food dollar goes to the producer.

Farmers are paid, on average, less than 20 cents for every dollar that people spend on food. In 1950, they received 41 cents; in 1980, they were still making 31 cents on average.

Processors, wholesalers and retailers are getting the largest shares. Farmers and ranchers make major contributions to our society by providing safe, healthy, reliable, low-cost, high-quality food to consumers' tables each day. But it the ag producer that markets directly to consumers, can add value to their own commodities and/or has a vertically integrated operation that will be in the best position to keep that ever-shrinking proportion of consumer dollars spent on food flowing to their farm or ranch.