Is Industrial Food Stealing Farmers Lunch Money?

Every year, the USDA calculates consumer expenditures on food, both at home and away from home (e.g., fast food), which totaled over $1.1 trillion in 2008.  They also estimate how much of every dollar spent goes to farmers (“farm value”) and the food marketing system (“marketing bill”). 

The marketing bill, according to the USDA, “provides a composite estimate of the value added to agricultural products by the food marketing system for all types of food, including both at-home and away-from-home foods.”  In other words, it is the amount of every dollar US consumers spend on food that does not go to farms, and is used to pay for labor, packaging, transportation, energy, miscellaneous, and corporate profits of “food marketing system” participants (USDA data table). For more information on what makes up the food marketing system, check out the USDA’s “The U.S. Food Marketing System: Recent Developments, 1997-2006″ report.

The farm value “is the value of the farm products equivalent to foods purchased by or for consumers at the point of sale by farmers.”  Combining the marketing bill and farm value equals consumer food expenditures.  OK so far?  Pretty straighforward, so let’s focus on one key data point that has been keeping me up at night:

Farm value has declined from 31 percent of every dollar spent by consumers in 1980 t0 19 percent in 2008, representing a 40 percent decrease in revenue flowing to farmers.

Making up the difference is the food marketing system, which divided its newly acquired 12 cents on the dollar between:

  • Labor – 126% increase
  • Misc – 123% increase (includes advertising and promtion)
  • Corporate profits – 120%
  • Energy – 112% (fuel and electricity)

So, how does the USDA explain this significant shift of who gets how much of the pie?

The farm value share has declined over the years due to large supplies of farm products holding down farm prices while increased expenditures for food marketing services have caused retail food expenditures to rise.”

I am assuming that the “large supplies of farm products” are really the 4-5 monoculture crops, not specialty vegetable crops (e.g., tomatoes, beans, lettuce, etc.), since so much of the fruits and vegetables we eat are currently imported.  According to a recent New York Times article, the four largest monoculture crops are expected to cover approximately 228 million acres in the US (corn-85 million, soybean-76 million, wheat-59 million, cotton-9 million), which is more than two-and-a-half times the 85 million acres in our National Parks and just over 51 percent of all US croplands.

As corn and soybean crops are major contributors to the manufacturing of low-cost sweeteners (e.g. high fructose corn syrup) and oils used in the highly-processed foods dominating supermarkets and fast-food establishments, is it any surprise that 12 cents on the dollar shifted to industrial food companies in the last 25-30 years?  Probably not.  But, did you know the specifics of how much so before reading this?

Regardless, I hope you will help me in educating more people about yet another significant and very real challenge our smaller farmers face in growing diverse crops.  This challenge joins what seems to be an ever growing list.

 

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7 responses to “Is Industrial Food Stealing Farmers Lunch Money?

  1. Rob,

    Interesting essay. Don’t you think that some of the reason may be due to competition? As you pointed out, a large portion of food is imported. One of the effects of competition is to drive down prices, which in turn forces the supplier (in this case the farmer) to become more efficient to compete.

    Unfortunately, this hurts the demographic you champion, namely the smaller scale farmer. They can’t get the same level of efficiencies through scale, and don’t usually have the same access to the capital needed to upgrade equipment.

    Another way to look at the decline is that it is a natural consequence of the market.

    One thing that may be interesting to look at (though it may not help your argument) is to look at this in terms of real revenue, not percentages. The percentage does not tell the whole story. Yes, the contribution to the farmer has gone down, but…this doesn’t necessarily mean that the farmer is making less. The same effect would occur if the cost of the other components (like say…labor) increased.

    I miss the cave, we used to have debates like this all the time ;)

    • Good morning, Dave.

      There is obviously more to these numbers than meets the eye, but one thing is certain. Farmers are receiving 12 percentage points less of consumer food expenditures than they did in 1980. Perhaps it is competition, but your suggestion of imports being the culprit seems off the mark.

      Instead, look at the food marketing system itself, which is taking commodity crops (esp. corn and soybean byproducts) and manufacturing and marketing fake foods. Consumers responding to well-financed ad campaigns and in-store promotions, vote their food dollars by buying these products instead of raw and lightly processed foods. This in turn increases demand for more commodity crops, which drives more cropland to be converted from specialty crops to commodities, especially when you factor in government incentives.

      The question in my mind is how do we stop this vicious, self-fulfilling cycle. We can attack policy, but that is a daunting task given industrial food’s resources. We can write books and start non-profits to spread the word. Always nice to have, but that won’t change mainstream systems. We can grow our own food. Fun idea until most of us realize how hard gardening is, which is even more difficult when doing so organically.

      Or, we can focus on building retail demand for local and sustainable food. Since it ultimately comes down to consumer spending, what better place is there to focus.

      Cheers,

      Rob Smart

  2. As always, your post is really well thought out! I think one way to build retail demand for local and sustainable food is to start asking about it, even when we know it’s not there.

    Just start asking your grocer, your waitress, etc. if they sell locally-raised, grass-fed beef (or tomatoes, or whatever). Even though the answer will likely be “no,” if enough of us start doing it, the retailers will realize there’s a demand. Eventually, some bright retailers will start meeting that demand.

    Cheers,
    KristenM
    (AKA FoodRenegade)

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  4. We are faced with the fact that we only get a very small part of the price paid for our meat. The retailer takes 50% to put our meat on their shelf so consumers can find it. The store must be maintained, employees paid, electric bills, etc. But first the butcher takes another 25% to 40% – prepaid. The little we keep must cover all our costs and pay us a wage. Scary but doable as long as everything else works…perfectly.

    This winter the slaughterer & the butcher and smokehouse raised their prices on us, without notice, by 24% and 36% respectively. Our commercial customers require a minimum of three weeks notice on price changes and it takes a week to notify them. This meant that we lost all our profits for a month. Imagine your boss not paying your for a whole month but you still had to work. But it is worse. They did it retrospectively for the meat we had already delivered. We didn’t find out until we went to pick it up and pay the bill. Since they have a near monopoly, and our meat, we have no choice. If we don’t pay them they keep our meat and our customers are inconvenienced. Imagine you already did the work for a month, spent the grocery money, paid your rent and still don’t get that pay check plus the boss gave you a pay cut and he expects you to show up tomorrow morning for more abuse. Life’s an adventure.

    On top of that we never know if the processors will be in business next week. We’ve seen three others go out of business in the last four years. Our state, like most, is bleeding slaughterhouses and butchers at a deadly rate. Without processing we can’t get pork to your fork. This hurts small farmers and ultimately consumers. Wither the small farms go goes the infra-structure for farming and all the jobs that support it.

    We have demand. That isn’t a problem. What we need is the ability to reliably get our farm’s product (grass/whey fed pork) to consumers. For this reason our family is planning to open our own inspected on-farm slaughterhouse and butcher shop. We’ve been working with our state department of agriculture and the USDA for the last year. We’ve been training in commercial meat cutting for the last nine months. Now I’m working on financing. Vertical integration is the only way we can make farming work. It isn’t just about the money. We must have security for our farm, and thus our family. We need to own and control the processing facility so we know it will be there in six months, a year, ten years. Without that we’re at the processors’ whims.

    As a big side benefit, having inspected on-farm processing means our livestock won’t have to be transported every week on that long multi-hour trip. That’s less stress and more humane for the animals which means better quality meat for consumers. It also means six hours less driving per week for us thus saving gas and greenhouse emissions. Getting from here to there is a challenge. We’ll make it. We have to.

    Cheers,

    -Walter
    Sugar Mountain Farm LLC
    Pastured Pigs
    in the mountains of Vermont

    http://SugarMtnFarm.com/blog/

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