As Food Prices Spiral, Farmers, Others Profit

WILLMAR, Minn. — The steepest run-ups in food prices since 1990 are hurting grocery shoppers, restaurants and school cafeterias but they’re making others rich.

The winners in the new food economy include crop farmers selling corn and wheat for near-record highs after years of crushingly low prices. Ingredient makers like Cargill and ADM are rife with profits. Fertilizer and tractor companies are cashing in. Hedge funds that made big bets on rising wheat, soy and corn were spectacularly correct. Oil and gas companies, too — it takes natural gas to cook those Wheaties and diesel to haul them around the country.

Travel along the nation’s food chain and you’ll find some of the biggest profits closest to the land. The nation’s farmers, who raise everything from cows to cucumbers, saw their average household income climb about 7 percent last year to more than $83,000. But in grain-rich states, the results were dramatically higher. In Minnesota alone, the median income for crop farmers soared 80 percent to $95,000.

And the rising commodities prices are proving to be bottom-line boosters for other sectors, too.

Profits at seed and pesticide maker Monsanto Inc. reached nearly $1 billion last year — a 14-fold increase since 2003. They’ve tripled to $1.1 billion at agrichemical maker Syngenta, and agriculture divisions of DuPont Co. and Dow Chemical Co. have also seen their earnings balloon.

Cargill, which makes ingredients and trades in commodities markets, boosted its profits to $2.3 billion, up nearly six-fold since 2001.

Meanwhile, profits at agricultural processor Archer Daniels Midland Co. have more than quadrupled to $2.16 billion during the same period.

Fertilizer makers are winning big, too.

Mosaic Co. saw its third-quarter profits jump tenfold to $520.8 million because strong demand from farmers is giving it power to raise prices.

Food prices in the United States rose about 4 percent last year, the fastest rate since 1990, according to the Agriculture Department. Prices on some foods rose much faster. White bread prices rose 13 percent last year, bacon 7 percent. Peanut butter jumped 9 percent.

And it’s picking up speed. Food inflation is running at an annualized rate of 6.1 percent as of April, the Bureau of Labor Statistics reported on May 14.

In addition, a weakened dollar makes American produce cheap and desirable abroad while weather-wrecked harvests in some foreign countries have generated regional scarcities.

Even if this year’s global harvest is robust, shoppers shouldn’t expect big price breaks anytime soon. The USDA said it expects food prices to rise another 4 percent to 5 percent this year.

"We’re in a new era," said Mike Helmar, director of industry economics at Moody’s Economy.com, "where prices are going to be a bit higher than they were in the past."