By David White, Ohio Livestock Coalition
Increases in retail food prices continue to be in the news. With upcoming holiday meal planning, conversation and concern about the price of food is likely to escalate. The Consumer Price Index (CPI) shows that the index for food consumed at home has risen 0.8% over the past 12 months. The index for food consumed away from home increased 0.2% in September and has risen 2.8% over the past 12 months.
According to the American Farm Bureau Federation (AFBF), shoppers paid more for food at the grocery store during the third quarter of 2012, with many popular breakfast staples — eggs, bacon, orange juice, milk — showing an increase in retail price.
AFBF conducts an informal quarterly survey of 16 food items that can be used to prepare one or more meals. The third quarter survey revealed that the total cost of the items was $51.90, about one dollar or 2% more compared to the second quarter of this year. Of the items surveyed, nine increased and seven decreased in average price compared to the prior quarter. The cost for the overall basket of foods decreased by about 2% compared to a year ago.
AFBF said that most of the quarter-to-quarter increase can be attributed to higher retail prices for breakfast staples, apples and bagged salad. The market basket survey items include apples, large eggs, bagged salad, bacon, whole milk, orange juice, boneless chicken breasts, sirloin tip roast, toasted oat cereal, ground chuck, white bread, vegetable oil, flour, russet potatoes, sliced deli ham, and shredded cheddar.
The survey also revealed that the average price for a half-gallon of organic milk was $3.81, about 70% higher than the reported retail price for a half-gallon of regular milk ($2.31). For the third quarter of 2012, the average price for one dozen regular eggs was $1.94 while the average price for a dozen cage-free eggs was $3.22, which is 90% higher than conventional eggs.
In evaluating its market basket survey, AFBF noted that through the mid-1970s, on average, farmers received about one-third of consumer retail food expenditures for food consumed at home and away from home. Since then, that figure has decreased steadily and is now about 16% according to USDA’s revised food dollar series, which provides a better understanding of food costs.
Using the food at home and away from home percentage across the board, the farmer’s share of third quarter’s $51.90 market basket would be $8.30. USDA’s revised and expanded food dollar series is composed of three primary series — marketing, industry and primary. Each series provides a different way of slicing the same food dollar to provide a variety of perspectives.
The marketing bill series identifies the distribution of the food dollar between farm and marketing shares. This series indicates that the costs of marketing farm commodities to U.S. food consumers were an average of four cents higher per consumer food dollar than was previously reported between 1993 and 2006.
The industry group series identifies the value added from 10 distinct food supply chain industry
groups to the food dollar (that is, the marginal contribution of each industry group to the final
food product). The farm and agribusiness share in this series differs from the farm share in the current marketing bill series in that it does not include nonfarm value added.
In 2008, 4.2 cents of the 15.8-cent farm share was value added from nonfarm supply chain industry groups, such as energy, transportation, and financial services. This series indicates that payments from each food dollar going to the energy industry group approached 7 cents in 2008, an increase of 75% since 1998. These estimates are higher than those provided by the previous marketing bill series, which only measured direct energy use of food processors, retailers, and foodservice establishments.
The primary factor series identifies the distribution of the food dollar in terms of U.S. worker
salaries and benefits, rents to food industry property owners, taxes, and imports. This series indicates that U.S. worker salaries and benefits coming from each food dollar steadily declined from 55 cents to 51 cents between 2001 and 2008. Imported ingredients, both food and nonfood, accounted for a growing share of the food dollar, climbing from less than 5 cents in 1993 to nearly 8 cents in 2008.
For additional information about USDA’s food dollar series, please go to http://www.ers.usda.gov/publications/err-economic-research-report/err114.aspx.