WHEN THE cost of raw food products like wheat rises, those higher up in the food chain, like processors and retailers, are quick to say that their prices must also rise.
But when commodity prices fall, as they have in the past year, it doesn’t necessarily mean food prices drop.
A survey conducted for Keystone Agricultural Producers, Agricultural Producers Association of Saskatchewan and Wild Rose Agricultural Producers detailed the price of a basket of food appropriate to feed a family of four for a week.
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The basket is a healthy one, based on Canada’s food guide. It cost slightly more this August than it did last year, despite lower prices paid to farmers for grain, oilseeds and livestock.
The basket cost $194.23 before taxes and the share that went to farmers was 26.25 percent. The year before, the basket cost $188.22 and farmers got about 27 percent.
Overall, the consumer paid $6.01 more this year, the farmer got 86 cents less and middlemen – processors, distributors and retailers – captured an additional $6.87 compared to last year.
Farmers’ returns varied depending on the food group, with grain the lowest at five percent and milk the highest at 53 percent.
The survey illuminates several issues.
First, food inflation, which Statistics Canada said is running at five percent year over year, can’t be blamed on farmers. Others in the distribution chain accounted for the increase, using the money to cover their costs and profits.
This is no surprise. Similar surveys have for years noted that the farmers’ return on consumer food spending is small. The United States Department of Agriculture in 2006 calculated that for every dollar Americans spend on food, the farmer gets 19 cents. Other costs included labour at 38.5 cents, packaging at eight cents, profits at 4.5 cents, transportation, advertising and rent at four cents each and energy and depreciation at 3.5 cents each.
Such reports remind farmers that there is a lot of money in the food chain between them and consumers. It is not all profit, but it is worthwhile for farmers to consider the viability of trying to access it.
It is partly a matter of who has power in the marketplace. Farmers in supply managed industries use their organization and government supplied powers to extract the biggest share of the consumers’ dollar.
Others might try direct marketing to consumers from the farmgate or through farmers markets, although the opportunities there tend to favour vegetable and fruit producers, not grain and oilseed growers.
Some livestock producers, working with local abattoirs, have found ways to sell a portion of their herds direct to consumers.
Farmers can also participate in closer relationships with processors, sometimes called value chains, producing either specific crop varieties or using specific production methods for which the end user is willing to pay.
But moving up the food distribution chain requires certain skills and attitudes and the outlay of labour and investment.
Many might reject the idea and focus on being low-cost producers of commodities, but for most, that is a struggle for profitability. Even they must question how they can get a fair share of the money consumers spend on food.
Bruce Dyck, Terry Fries, Barb Glen, D’Arce McMillan and Ken Zacharias collaborate in the writing of Western Producer editorials.
