By Mary Hightower
Consumers who see parallels between crude oil and gas prices might expect the same for food, but what seems like a straightforward relationship between prices at the farm and prices at the grocery store is anything but simple, say economists with the University of Arkansas Division of Agriculture.
Making a direct connection between the two “is extremely difficult,” said Hunter Biram, extension economist for the Division of Agriculture.
Global and domestic economies are pushed and pulled by interest rates, weather, war, disease, trade conflicts and countless other factors.
"Given the complexities of the food supply chain, the best research available focuses on the share of the food dollar attributed to farming, along with a comparison of crop price volatility compared to food price volatility. Historically, food prices are about half as volatile as crop prices."
Buck stops at the farmer
In manufacturing and other industries, if the price of a raw material increases or the cost of doing business rises, those costs are passed on to consumers.
That’s not the case in agriculture.
“The farmer is a ‘price taker’ and cannot pass his costs along to the buyer,” said Scott Stiles, extension economics program associate for the Division of Agriculture.
According to the Economic Research Service of the U.S. Department of Agriculture, a farmer’s share of every consumer dollar spent on food is about 11.8 cents. The lion’s share of consumer food costs goes to marketing.
Source : uada.edu