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Livestock producers battle high costs, consumers enjoy bargains

By TIM THORNBERRY
Kentucky Correspondent

LOUISVILLE, Ky. — The good news-bad news scenario is fitting right now as farmers endure lower prices for commodities, while consumers are enjoying lower prices at the grocery store.
The Kentucky Farm Bureau Federation’s (KFBF) quarterly survey of food prices indicates a “dramatic” decline in dairy and beef products over the past three months.

Consumers will be happy to see the savings in their food budgets, but dairy and livestock famers are paying the price in their operations.

According to KFBF, “the July survey shows the average price for a gallon of milk at $2.86, which is 21 cents below the April average. Other reductions in the dairy case include a 59-cent drop for a gallon of ice cream and a 53-cent cut for a 24-slice package of American cheese. All told, the average cost for the six dairy products on the list fell by 12.7 percent.”

While that certainly is good news for consumers, it doesn’t necessarily translate into good news on the farm. Many dairy producers are leaving the business as prices hover around $10 per cwt. while inputs are in excess of $15 cwt.

The situation in the dairy business has become such a concern that legislation has been introduced in Washington to help the nation’s dairy farmers. The bill would “amend the Agricultural Adjustment Act to require the Secretary of Agriculture to determine the price of all milk used for manufactured purposes, which shall be classified as Class II milk, by using the national average cost of production.”
In a letter to Senate Agriculture Committee Chair Tom Harkin (D-Iowa), Ranking Member Saxby Chambliss (R-Ga.), House Agriculture Committee Chair Collin Peterson (D-Minn.), and Ranking Member Frank Lucas (R-Okla.), National Farmers Union President Roger Johnson wrote, “From Minnesota to California and Texas to Vermont, the current situation is untenable. Equity is rapidly disappearing, market prices remain at 1970 levels, creditors and feed suppliers are cutting off producers yet there is no relief in sight. Congress, the administration and the American public must not wait any longer in offering these individuals a lifeline.”

Johnson also noted in his letter that, “the NFU board voted to encourage Congress to pass a dairy stimulus package to provide an adequate safety net for producers in addition to establishing an inventory management program. Furthermore, the board expressed support for the concept of the Federal Milk Marketing Improvement Act of 2009. Most importantly, the board expressed the need for producers to receive an immediate financial lifeline to sustain their livelihoods through this unprecedented situation.”
As far as beef prices go, the KFBF survey noted “the average on the five beef products declined by 9.5 percent. The biggest dip was for ribeye steak, which plunged from $9.95 per pound in April to $8.57. A pound of ground beef fell by 31 cents on average.”

Cattle producers have felt the decline in profits for many reasons including the cost of feed which spiked with increased demand of corn for fuel purposes.

In a statement supporting the Affordable Food and Fuel for America Act, Gary Voogt, National Cattlemen’s Beef Association president wrote, “Since January of 2008, cattle feeders have lost a record $5.2 billion in equity due to high feed costs and economic factors which have negatively affected beef demand. According to the United States Department of Agriculture Economic Research Service, in 2008, feed costs for livestock, poultry and dairy reached a record high of $45.2 billion – an increase of more than $7 billion over 2007 costs. Yet farm gate cattle and calf receipts have essentially remained flat, at between $49 and $50.2 billion during the past five years. Soaring feed costs and government payments to the ethanol industry are hurting small businesses and family ranches. Cattle producers don’t ask for subsidies, just equal footing.”

At the local level

Typically fruit and vegetable prices fall during their peak growing season as reflected in the KFBF survey which showed the overall average among the produce items was down 8.7 percent from April.
Among the 40 items in the survey, only nine were priced higher in July than in April.

While the decline in food costs may have a varying affect on retail grocers, many consumers now get much of their food staples from alternative sources such as farmers’ markets. The reduction hasn’t been as noticeable there for many vendors but the practice of comparison shopping is more prevalent now than in the past.
Sarah Buzogany, assistant manager for the Lexington Farmers’ Market said customers are being very frugal during these tough economic times.

“You can tell when customers come to the market, they’ll count their money before they approach a booth, which some of the farmers have commented on,” she said. “I’ve also heard many people mention they’ve planted their own gardens so they come to the market to supplement the things they don’t have.”
Buzogany also said that in the last couple of weeks business has really picked up, contributing that to the steady customer base the market enjoys.

The Smith Family Farm, located in Franklin County is one of the founding members of the Lexington Farmers’ Market and has seen their share of economic trends. Jefferson Smith, IV along with his wife Shirley and mother Joyce run the business.

“I find that a lot of people are price shopping looking for the best quality product at the best price,” said Smith. “And they are, maybe spending a little less instead of overdoing it as in past years when the economy was a little better. They are not over-buying.”
Smith also said because of the quality factor, the market seems to be doing well as far as having repeat customers even though many could go to the local supermarket and find something less expensive.

The food price survey conducted by the KFBF has been conducted for four decades and, according to the agency is “a tool to reflect retail food pricing trends and their relationship to what farmers receive for their raw commodities. On average, the farmers’ share of the retail food dollar is around 19 cents.”

7/22/2009