Food prices growing

By Hannah Wever
Review Staff Writer

Published: July 24, 2008

It costs more to buy food because it costs more to make food.
For farmers, the expense to produce the items we want to put on our dinner table has increased dramatically, and the farmers’ higher costs are passed along to the consumer.
“In agriculture, our input costs have gone up tremendously. Everything farmers use has probably gone up about 50 percent in the past year,” Agriculture Extension Agent Steve Hopkins said.
Prices for feed, fuel and steel have all gone up 50 to 100 percent, he said. “For a livestock farmer, feed, fuel and steel…that’s pretty much everything they use.”
Monk Sanford is an experienced dairy and beef cattle farmer. Lately, he’s seen input costs higher than he ever thought they could get, he said.
“Everyone knows what diesel fuel has done, and we power all our tractors on diesel fuel,” Sanford said. “And fertilizer is petroleum based as well. That’s doubled by 50 percent.”
The price of corn has jumped from $4.50 per bushel to $7 per bushel over the last 18 months or so. The price of feeding cattle has risen, but the price a farmer can get for those cows has not increased proportionately.
“As a result, the whole livestock industry has been losing money for the past six to 12 months,” Hopkins said. “Generally, everyone in the livestock industry is losing money now. Input costs are moving more quickly than they were. As a result, due to higher corn prices and fuel, it’s going to trickle down to the consumer, particularly meat.”
And as alarming as it is for a consumer to notice an exponential increase at the grocery store cash register, Hopkins said prices are only beginning to climb.
“You could easily see a 25 percent increase between highs this year and lows next year,” he said.
Sanford’s predictions were similar.
“Unfortunately, for the consumer, if our input costs stay the same, the price in the store hasn’t begun to go up,” Sanford said.
Farmers, in recent years, have sold their finished cattle for $.85 per pound. But more recently, that per-pound-price has jumped to $1.15 and $1.20. But that price doesn’t indicate a larger profit margin for producers. Rather, the price-per-pound reflects the higher expense of feeding and raising those beef cattle, trucking them to feed lots and processing facilities.
According to Hopkins, when it comes to financial risk, the farmer walks a far finer line than ever before. Input costs have increased by about half; what a farmer receives has gone up by about the same. Quite simply, there is a larger investment required to produce a profit.
If local producers have to spend as much as 50 percent more to get their livestock to the consumer, the consumer, Hopkins said, will likely experience a comparable spike in price.
“It won’t surprise me to see similar increases on the consumer side,” he added. “It’s just beginning.”
Around Orange County, most of the cattle raised for beef are carrier cows or brood cows with calves at their sides.
The calves go to market at 8 to 9 months old where they are sold as feeders. They go to a feed lot in states like Texas, Colorado, Kansas, Nebraska and Iowa for about 150 days and they fed until they’re considered finished cows.
As finished cows, the animals are transported from feed lots to harvesting facilities-most are located in the west near feed lots. After the harvesting process, the de-boned, processed, consumer-ready meat is shipped back East.
For the layperson, shipping thousands of tons of cattle across the country each far just to fatten them up may seem like an unnecessary expense. To the uninformed, a more reasonable choice might be to keep the cows here in Orange and feed them locally until they’re ready for market.
But according to Hopkins, farming locally-raised, locally-fed beef cattle for the conventional consumer market isn’t a reasonable venture for the majority of beef farmers in Orange.
“It’s cheaper to ship the corn East and the cattle West,” Hopkins said. “It takes seven pounds of corn to put a single pound of body weight on cattle. We’re talking commodity beef-large scale.”
But there is a niche market for specialty, locally-raised, grass fed or organically raised beef, Hopkins confirmed. “Specialty meats are a growing segment of the industry for people wanting to know where their beef came from.”
But Hopkins predicted that farmers catering to the discriminating consumer will experience the same financial setbacks as other beef producers.
“As the economy slows down, it’s going to make it tougher for the niche markets to make money,” Hopkins said.
It isn’t only beef farmers whose feed, fuel and other costs are eating up their profit before the livestock make it to market. Swine and poultry farmers have a tough row to hoe, too.
“As bad as it is with beef cattle, it’s probably worse with swine,” Hopkins said. “The swine industry has suffered tremendous losses in the last year.”
It takes longer to raise and feed a hog to the point where it’s marketable, he explained. So in that time, while a hog is maturing, there is more expense to the farmer to keep it healthy and prospering. Meanwhile, for the farmer, their’s a higher overhead before that hog goes to market. There’s a far speedier turnover rate for beef cattle and poultry.
Not all farmers will be able to sustain their herds, their livelihoods and their families in the current economic climate, Hopkins said. Some are already reducing the amount of fertilizer they use, or downscaling their operations dramatically.
“People across the county are cutting back on what they use because of profitability,” he said.
Sanford said he’d heard from farmers that their budgets simply couldn’t stretch as far as they had in previous years.
“A lot of people are cutting back on fertilizer because of the price,” he said.
But for producers who have enough of a financial foothold to weather rising input costs, there will be a greater chance to realize profit once the market eventually levels out, Hopkins said. “It’s going to be tough this year, and tough next year because of input costs. Those who can make it through the transition will probably be okay down the road,” he said. “Will everyone be able to stay in? No, they won’t. But for those that justify that additional cost and risk, times will get better.”
“We’ll just have to see out it all shakes out,” Sanford said. “In six months to a year, we may have a little price moderation.”
For the livestock farmer who grows a good portion of corn and other crops for his own feed, this year’s forecast is somewhat more encouraging.
“Locally, it looks like we’re going to have an excellent corn crop and soybean crop due to the weather.”
For farmers who are raising at least some portion of what their cattle eat, there may be some savings. And for farmers with corn, soybeans, wheat and hay in the ground, the price they receive more closely parallels the price to produce.
“For the crop farmer, in the short term, they’re in good shape,” Hopkins said. “Their costs have gone up like everyone else, but what they receive has gone up.”
Hopkins warned against counting chickens-or counting corn kernels, in this case-before they hatch.
“Today, we’re looking at a good crop, but that could change,” he said. There are still several weeks remaining in the Atlantic hurricane season, and any number of catastrophic meteorological anomalies with the potential of wiping out field after field of crops is still possible.
“We have a hurricane two weeks before the crop is made and they could lose it all,” Hopkins said. And if farmers end up taking a loss on their crops this year, he added, it will be a far larger loss than ever before. After all, it cost twice as much as in previous years just to get the crop in the ground.