The holidays are filled with family, friends and too much food! God Bless America!
Every year I attempt to follow my always-present-but-seldom-followed diet plan and not overindulge during the holidays. My guess is that, once again, the food will win, and the diet will lose based entirely on years of experience.
The traditional turkey dinner is always my downfall. I am not a huge fan of turkey, but man do I love all of the fixin’s that go with it.
American Farm Bureau does a survey every year to determine the cost of the traditional Thanksgiving turkey dinner, and this year I have great news, the cost has gone down! You will spend less money for your meal than you did last year. The feast for a family of 10, according to American Farm Bureau’s annual survey, should cost $48.90 — or $4.89 per person — down 22 cents from last year.
The cost of the annual feast has declined steadily since 2015 and is currently at the lowest level since 2010, according to AFBF Chief Economist, Dr. John Newton. The cost of the turkey, milk, sweet potatoes, green peas and rolls were all lower than last year.
As a consumer, I say great news! However, as a farmer, I say whoa, what is going on? How can a farmer continue when the cost of the goods we produce is declining? So in this article we will explore what farmers get for their products. You could find the numbers shocking. I do.
Agriculture has been struggling for most of my career as a farmer. Sure there are years when production is up and prices are okay, and we make enough money to keep us farming, but there are always years of drought, hail, too much or too little of something that ends in a loss.
Where I farm, the old timers will say that you should expect to lose one crop out of every seven. That is a lot. The past few years we have lost more than that.
Today, USDA’s Economic Research Service’s Food Dollar series revealed that in 2016 the farmer’s share of the food dollar fell to 14.8 cents — down 4.5 percent from the prior year — and is the lowest level since the series was launched in 1993. When adjusted for inflation, the farmer’s share drops to 12.2 cents per dollar spent, down 11.6 percent from 2015.
Why has the farmer’s share decreased? Honestly, there are several reasons. We have a HUGE surplus of the major commodities like corn, wheat and soybeans. This drops the price of the commodities. The value of the dollar compared to the other currencies in the world also makes the U.S. commodities expensive compared to countries with weak currency values. This, and U.S. policies around the world, often makes our commodities the last to be purchased.
The current attempt by the Trump administration to improve trade with Mexico, Canada and China, three of our largest purchasers of ag commodities, has also reduced the price farmers receive for commodities. Ninety-five percent of the world’s consumers live outside of the United States. We have to have good trade policies or farmers suffer.
So how much does a farmer make on some common foods? Here are some examples:
Milk: According to Wisconsin Farmers Union a $3.43/gallon of milk provides the farmer with $2.02/gallon. A production cost of $1.99 leaves the farmer with a profit of $0.03/gallon. National Farmers Union says the farmer only gets $1.32/gallon. So if National Farmers Union is correct, the farmer is losing money with every gallon produced.
Bacon: Farmer gets $0.80 out of the $5/pound selling price.
Soda: Costs $2.19; farmer’s share $0.05
Apples: Cost $2.79/pound; farmer gets $0.31/pound.
Bread: $3.49/2 pounds; farmer gets $0.12/2 pounds.
Potatoes: 5 pounds Russet potatoes sell for $4.49; the farmer gets $0.58
All of this data comes from National Farmers Union. I could list many more, but you get the point. The farmer doesn’t make very much.
USDA also predicts that U.S. farmers’ average Net Cash Farm Income will be down 19.9 percent in 2018 from 2017. This prediction was prior to President Trump and Ag Secretary Sonny Perdue’s announcement of the Market Facilitation Program which is supposed to help correct agricultural commodity prices hurt by the trade negotiations of the Trump administration. The MFP program will help in 2018 but I doubt it will replace the loss caused by the trade tactics.
Every person who eats has a farmer to thank for his meal. In my view, this makes us the most important industry in the world. How does agriculture profit compare to other industries? Aswath Damodaran, a professor at Stern School of Business at New York University, conducted a survey of 94 industries in January of 2018. Agriculture ranks 82 out of 94 in pre-tax unadjusted operating margin. That means that the agriculture industry that puts food on every table in the world is among the 12 lowest paid industries in the United States.
The World Health Organization has predicted that the population of the world will exceed 9 billion by 2050. The need for food will be higher than ever before. In fact, it is commonly said that the farmer will have to produce more food in the next 30 years than we have in the last 10,000 years combined to feed 9 billion folks. This is a pretty daunting task. The agriculture industry should eventually get the respect that it deserves. Most of the necessary production to feed the 9 billion people will need to come from underdeveloped agricultural regions in the world. In my mind, the U.S. will play a major role in not only the production of the food but also in helping to modernize agriculture in the developing world. Given the turmoil that has always been present in the developing countries. I believe those predicting that the U.S. will not need to produce much more than we do today are wrong.
We need agriculture to be profitable to draw young people into the industry. It will take all hands on deck to feed 9 billion people. We need to be preparing now with technology, people and policies or more plates will be empty. Today 1 in 8 folks in the world go to bed hungry. What will that be in 2050? Much, much more if we don’t start preparing our industry for tomorrow, today.
So, enjoy your holidays, but start thinking about the future. Agriculture is already the most important industry in the world, but we are underpaid and underappreciated. That needs to change.