Farmers Say They’re Not Reaping Any Windfalls

With global warming and global unrest in the daily headlines, the national push to tap into biofuels to lessen the nation’s dependence on foreign oil has caught the interest of local and state farmers.

At the same time that corn and soybean prices are up, consumers are paying more at their local grocery stores, and news reports continue to circulate about food shortages contributing to a humanitarian crisis.

For some local farmers and agricultural officials, the agricultural sector continues to get an unfair shake, serving in many cases as a whipping boy for economic concerns.

"Agriculture is not responsible for the major increases in food prices," said Calhoun County Clemson Extension Agent Charles Davis, citing information he received during a recent agricultural summit in Clemson.

"The experts say in their opinion food prices are only about 10 percent of the increase in commodity prices. The vast majority of what we’re seeing in food price increases is increasing transportation costs and processing costs," he said.

The Food and Agricultural Organization of the United Nations backs up Davis’ contention.

A recent report released by the FAO entitled, "Growing Demand on Agriculture and Rising Prices of Commodities," points to agriculture-based biofuels as just one cause of the increase in food prices. Other causes are weather-related production shortfalls, a decline in stock levels, increased freight costs and a changing structure of demand as economic development and income have grown in emerging countries.

Davis said while there is little doubt food prices have gone up, prices are still relatively fair when looked at from a larger perspective.

"We are used to cheap food in this country," Davis said, explaining that food prices have not increased as significantly as other commodities. "Gas prices have taken the heat off of food prices. They are nowhere near the rate of gasoline prices going up.

"The consumer is much more in tune to increases at the gasoline pump than they have been concerned about their grocery bill."

The U.S. Bureau of Labor Statistics Consumer Price Index shows prices increased by 4 percent in 2007 and projections are they will increase along similar lines this year. The American Farm Bureau Federation says these price increases are in line with historical trends.

Davis also says consumers must realize that for a $2 loaf of bread in the grocery store, the farmer will see about 14 cents, with the largest share of the money going to labor- or energy-intensive activities such as transportation and fuel.

"What the public perceives as a huge windfall profit for farmers is not so," Davis said. "Crop prices are a two-edged sword. We have improved crop prices but at the same time we have much higher input costs."

Veteran Springfield farmer Charles Ray Brown sees this double-edged sword firsthand and he hopes it does not mean his demise.

He is one of the many local growers who have increased their acreage of corn and soybeans over the past few years to tap into the higher commodity prices.

Earlier this week, corn at Orangeburg County elevators sold for $5.77 a bushel. Soybeans were $12.53 a bushel.

But Brown says rising costs for fertilizer, at $600 a ton, and diesel costs approaching $4.40 a gallon have offset any significant gains from high prices.

"The expense is about to outdo what we are getting on that end," Brown said. "The input cost is just going crazy. How would you like to fill up a 100-gallon tank?"

Brown said to come out in the black, it will require a good crop. If the crop is bad, rock bottom will be where many growers end up.

"We run about 850 acres of irrigated land on corn and peanuts," he said. "We made a good crop but it cost like the devil to make the good crop."

Cope farmer Ronnie Gray says rather than feeling comfort because of the higher prices, there are a lot of uncertainties.

"The thing about it is that we lose more if there is a drought or crop failure because we have a lot more input," Gray said, noting how he has paid double for fertilizer from previous years. "When the market price doubles, input also doubles. It all works out to be the same."

In fact, while some farmers have increased corn acreage, Gray says he has actually cut back due to high fertilizer prices.

"Everything is too high right now," Gray said, laying blame on rising fuel costs.

Davis said input costs have increased to the extent that if a farmer puts in about $600 an acre in corn at $6 a bushel, it will take 100 bushels of corn just to break even.

"Now to break even, we have to do better than the state average to make any money," Davis said. "That is a little scary. How many years do we stay on top of the state average? Not very often."

But then there is the contention that ethanol has contributed to the rise in food prices. The American Farm Bureau says that is without foundation.

Referring to various unidentified studies, the AFB says that oil and gas prices would be as much as 10 to 15 percent higher if biofuel producers were not increasing their output.

A University of Wisconsin study says ethanol demand has increased corn prices by 41 cents a bushel.

Agricultural economists expect continued high food prices will propel many to begin to change their dietary habits, causing them to eat at home more or eat more fruits and vegetables.

Some experts believe food prices will stabilize over the next few years as farmers will more likely plant more of the needed crops.

Brown echoed this sentiment, noting that in the past, "If you paid a farmer good money for something, the farmer will overproduce it and help the price to come down."

The use of crops for fuel has also raised concerns about a pending food crisis.

But Brown said this is another area of misplaced blame.

"If you don’t have energy to produce food, how will you produce it?" Brown said. He said with the United States’ reliance on foreign oil, alternative fuels is the way to go.

"Ethanol is not the whole answer, but we have to start somewhere," Brown said. "We have to have safe energy without buying it from other countries. We could be drilling oil places in this country if it were not for environmentalists."

Davis says there is still a lot of corn going into the food chain. When corn is used to produce ethanol, it is only depleted of its starches and can still be used as feed or to produce vegetable oil.

"What we are seeing is the market trying to catch its breath," he said, noting that much is based on speculation that drives up fears. "The market will determine who gets what."

While globally food shortages are a serious issue, some experts say there is little chance of that happening in the U.S. unless weather patterns make for poor crops in the coming seasons either in the U.S. or overseas in countries the U.S. is dependent on as part of free-trade agreements.

Globally, the head of the United Nations World Food Program early last week said the agency is already taking precautionary measures by rationing food aid to address worldwide food shortages and increasing commodity prices, which are expected to continue to 2010.

The agency head has said global food reserves are at their lowest level in 30 years.

Charitable organizations like Catholic Relief Services and others have seen rising prices, requiring more funds to help feed the same amount of people as in the past.

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