Ag at large: Price share between farmer and food store

The price gap between farmer and food stores can go from a few cents to dollars, putting the farmer at a disadvantage. (Courtesy of bildgebende_Momente/pixabay)

For each dollar consumers spend for food products less than 20 cents is received by farmers who produced the food. The rest goes for transportation and handling, storage, promotion, profit for handlers and sellers, and who knows what else?

Of course, if you are fortunate enough to buy some of your food products at a farmers market, the farmer who grew or otherwise produced it receives a much greater share of your food dollar, and you receive a fresher, probably riper and tastier product.

For most consumers it is surprising, even shocking, to learn how little of the money they spend for food ends up at the farm level. If some of the products you buy are processed, frozen, canned or packaged, the price of that treatment usually goes to somebody other than the farmer.

The U. S. Department of Agriculture has compiled a chart showing the gap between the eventual sale price of 15 food commodities and the amount received by the farmer who produced them. Farmers in California’s Central Valley and adjoining production areas are the major producers of six of them.

With carrots, for example, if the package sells in the supermarket for $3.99 the farmer who produced them received $1.36. The Southern San Joaquin Valley produces a major share of all the fresh carrots produced in the country, a prime example of the price differential.

The price differential is even more extreme for tomatoes, another commodity for which California production dominates. Assume the package of tomatoes sells for $3.99, the grower who produced them receives only 15 cents. A commanding share of the state’s tomato production is processed into catsup and other products, so the processing and canning cost is part of the equation.

Lettuce is another California tonnage leader. Assuming the retail package is priced at $2.49, the grower who produced it receives a mere 29 cents. Producers who combine some of the other salad vegetables with lettuce in convenient packages can claim a bit more of the price they bring at retail, but their investments in packaging equipment and wraps are substantial.

California egg producers reclaim a slightly bigger percentage of the retail price of their product, partly because most of their production is consumed within the state, minimizing transportation costs. If eggs sell at retail for $2.19 the producer receives $1.10. Part of his receipts must go, or have already gone, to restructuring his laying facilities because voters who know little about their needs have demanded that his hens have more space for living, laying and lounging.

The more we have to listen to voters and others far removed from production sights and the realities of production the more it will drive food costs up, even though their voices echo through the ballot box. Voters can be and have been savagely deceived by emotional messages from organizations and individuals seeking changes and procedures more for political reasons than for the true welfare of animals.

Although it’s not well known, California is a significant producer of potatoes, and the bulk of production goes to the fresh market, not to chips. Consequently, the average retail price of $4.49 at retail returns only 58 cents to the grower. It’s enough to persuade a potato grower to shift to mushrooms.

Another strong differential is observed with California dairy products. For an amount that brings $4.49 at retail, the dairyman received only $1.32. That differential helps to explain why dairying in California has not done well in the state for two or three years.  Several dairies have sold out, moved out or just bowed out.

Margins are thin. As more consumers learn that these products instead of the sugary treat can keep them thin as well, we might see a turnaround.

Don Curlee is your man when it comes to Agriculture. His Ag Alert column in our publication is sure to inform you on what you need to know when it comes to the agricultural industry.