While farmers wait to learn what and how much they can plant
under whatever programs
Washington finally adopts, some consumers worry. How will the
drawn-out farm bill battle
affect their grocery bills?
"We don’t see the delayed farm bill as having a
significant effect on grocery
prices in 1996," said Bill Thomas, an economist with the
University of Georgia
Extension Service.
"In the short run, I see world markets having much more
effect on prices than
domestic farm policy," he said.
Thomas expects many grocery prices to rise 2 percent to 4
percent in 1996. "That’s
about the same rate as inflation," he said, "so
consumers shouldn’t see much of
a net change."
Potential price hikes vary by commodity, he said, with
several interesting twists.
Fresh fruits and vegetables should remain plentiful, but
their prices will increase the
most — 6 percent to 8 percent.
Fresh produce isn’t supported by government programs, so the
higher retail prices this
year are due mostly to export demand. World markets demand large
quantities of U.S.
produce, since the quality is very high.
"U.S. growers export about 25 percent of their fruit and
vegetable crops,"
Thomas said. "World demand that strong means U.S. consumers
will have to pay more to
get the same high-quality produce."
The North American Free Trade Agreement had some effect on
produce markets. Thomas said
the United States imports many of the same items it exports, but
during different times of
the year.
During the winter we may import produce from Mexico, he said.
But southern U.S. farmers
provide produce for U.S. and world markets over a long growing
season.
Prices of other commodities may change less, he said. As
consumers, we know the price
of staples — the items we buy every week. So we’re more aware
of changes of those items
and wonder why the price fluctuates every week.
Some people don’t pay attention to fairly minor fluctuations,
thinking, if they need
milk or ground beef, they need it at almost any price.
A government support program can affect prices of items not
directly covered by the
program, Thomas said. For instance, grain prices kept
artificially stable have kept beef
and pork prices more stable.
Farmers feed corn and other grains to livestock that
eventually are sold at grocery
stores. As feed-grain prices rise or fall, so do meat prices.
As consumers buy more prepared foods to make meals easier and
quicker, they may not
realize that for many items, only about 10 cents of every dollar
of cost is actually for
food.
"The rest is preparation, labor, packaging, safety
inspections, transportation and
other related costs," Thomas said.
Basic foods may contain even less food cost than that. A
regular loaf of plain bread,
Thomas said, may contain only three to four cents’ worth of
wheat per dollar of retail
cost.
"So even if grain prices increase fairly dramatically
this year," he said,
"retail prices of such items won’t increase much."
Still, Thomas said U.S. consumers spend less of their budget
on food than those of any
other country: 7.8 percent on average, compared to almost 20
percent in Japan, which has
roughly the same overall economic picture. Former Soviet
countries spend around 30
percent, and in India shoppers must fork out 68 percent of their
household dollars for
food.
"Even though our percentage is lower, we still spend
more actual dollars on
food," he said. A family in India may spend the equivalent
of $500 a year on food,
while an American family may spend that much in a month.
The American system of food delivery and availability, Thomas
said, is geared almost
totally to satisfying consumer demand.
"Transportation or weather affects short-term prices
more than almost
anything," he said. "Those changes are usually
temporary and the price
stabilizes quickly."
