Moderated by Rick Badie
Because of a record drought, some experts say we could pay from 3 percent to 5 percent more next year for poultry, beef, dairy products and produce. A UGA professor says more should be spent on agricultural research to increase production, which helps keep food affordable. A food bank executive outlines the role charities play and how grocery inflation affects those living on the edge.
By Octavio A. Ramirez
Drought is gripping American farm country. Most of the Midwest and much of Georgia is withering under what could be the worst drought in 50 years. More than 60 percent of U.S. farms face abnormally low rainfall. Despite the sobering statistics, food prices shouldn’t increase as much as you might think. The United States Department of Agriculture’s food inflation forecast remains steady at 2.5 to 3.5 percent for 2012 and predicts 3 to 4 percent increases for 2013. By comparison, food inflation last year was 3.7 percent and a whopping 5.5 percent in 2008.
The fact that prices should remain relatively stable is proof of the resilience of the U.S. food system and a testament to American farmers, food and agribusiness companies and agricultural researchers who, through innovation, keep the food system strong.
While the drought may not have a major impact on consumers, overall food prices have sharply increased, swelling nearly 20 percent over the last five years. This is an alarming trend, particularly when low- and middle-class incomes have been stagnant. For Americans already struggling, even modest increases in food prices hurt. The less money you make, the larger the percentage of your income it takes to buy food. Fortunately, for now, most poor families get support from food assistance programs, and the USDA makes adjustments based on food inflation levels. However, many lower-income families don’t qualify for programs and must make up the difference. We can usually adjust our household budgets to deal with short-term spikes in consumer prices due to a natural disaster. The long-term trend of increasing food prices is a far greater concern and harder to maintain in a family budget with no income increase in sight.
In spite of these price increases, on average Americans still spend only about 7 percent of household income on food. Europeans spend closer to 15 percent and in some Asian countries food gobbles up 80 percent of household income, yet buys the least amount of calories.
For years, U.S. farmers and agricultural scientists have fought a battle to increase production at a sufficient pace to keep food affordable while feeding a rapidly growing population. We’ve been successful mainly due to federal and state funding for agricultural research and extension programs at land-grant universities, including the University of Georgia, and income support programs that offered farmers a financial safety net in times of disasters such as the drought we now face.
However, public funding for agricultural research and extension has plummeted over five years and the financial safety net that keeps producers afloat during natural disasters is in danger of being dismantled. It’s clear this is a time of crisis. For the rest of this century, farmers must produce enough to meet the needs of an expanding population. They must produce it on less available land and use less water. If agricultural research and extension and basic aid to farmers in times of crisis continue to be cut, it will be hard to meet this challenge. The consequence of failure will most hurt those who can afford it the least.
Octavio A. Ramirez is head of the Department of Agricultural & Applied Economics at UGA.
By John Becker
We have some real challenges baking in the Midwest. The significance of this drought resides in the historic economic situation where it is difficult for folks struggling to feed their families. Heat and lack of rain are hammering corn yields, driving up prices of food and fuel.
In addition, the drought forces ranchers to send cattle to the feed lots as the pastures cannot support feeding herds. Any short-term glut in the next few months will be followed by higher prices in 2013. Exacerbating the problem is the fact that everything eats corn, including our cars. Some experts predict a 5 percent increase in overall food costs.
From July 1, 2009, to July 1, 2012, we have experienced roughly a 30 percent increase in fuel cost. This occurred during a time of stagnant wage growth and high unemployment. Food prices have increased as well, showing a roughly 10 percent in increased cost from 2009 to 2012. We expect to add an additional 5 percent cost on the food side due to the drought. For lower-income folks, this will have the effect of a 10 percent loss in gross income.
Folks on the lower end of the economic scale suffer more because basic necessities are a larger percentage of their income. Someone who works in Georgia and makes $10 an hour will spend roughly 17 percent of their budget on fuel, leaving 17 percent, or $65 a week, left over after taxes, for housing, related costs and insurance. Wages are stagnant. Calculate 17 percent of your income and imagine spending that on fuel.
The emergency food system depends upon excess. Whether we are obtaining excess fresh produce, industry over-runs or federally-purchased commodities, it all hinges on excess. We still have not passed a farm bill through the Senate. Some of the bill’s iterations have drastically cut funds available for low-income folks. This is not good now that food and fuel prices are going up. Food banks have kept the cost of each mile driven down to a 15 percent increase in fuel expenditure through efficiencies. Let’s assume most individuals have done the same. Tack onto that another 10 percent increase in food prices over the last three years and then add a predicted 5 percent more, and our sample person is paying 30 percent more for basic items compared to 2009. The $130 a week they use to drive to work, eat and do everything else with is now worth about $90 in 2009 money. That is equivalent to a loss of income of 10 percent or $2,000.
Let’s close with some solutions: review, and pass a robust farm bill with strong food stamps and emergency food provisions; review and reduce the cost of taxes and additives on our fuel; support local farming efforts. We need a diverse portfolio of food production that is less dependent on transportation costs. The Food Bank of Northeast Georgia is working in this area.
Remember the ’90s? Our wealth then was created by everyone because food and fuel were inexpensive. For everyone to contribute, we all need a little excess. The drought is bad, but changing our policies can help. We cannot afford to subordinate reality to ideology.
John Becker is president and CEO of the Food Bank of Northeast Georgia.