990716 Food Prices Stay on the Rise

Washington - The prices farmers get for their crops are the lowest in decades for some commodities, though consumers could not tell by their grocery bills.

Retail food prices have risen 7.6% over the past three years, while the cost of commodities like wheat, corn and cattle has fallen 10.7%, according to government economists.

The cost of commodities accounts for a small fraction of the price of many foods, so fluctuations in grain and livestock markets typically have little impact at the supermarket or restaurant.

Farmers get 21 cents of each dollar Americans spend on food, and that share has been falling sharply. A decade ago, the farmers' share was 32 cents on the dollar.

“I don't think there's enough people who make a correlation between the wheat farmer and the price of bread or the cereal in a cereal box,” said Naomi King, who farms with her husband near Jetmore, Kan. “They don't understand how little the farmer gets, that's for sure.”

The average price of a loaf of bread went from 79 cents in 1995 to 87 cents in 1997, although the cost of the wheat dropped from 6 cents to 5 cents over the same period, according to an Agriculture Department study released last week.

The agricultural economy is in its worst slump since the early 1980s because of a worldwide grain glut. The price of wheat, one of the Kings' main crops, dropped from $4.55 a bushel in 1995 to $3.38 in 1997. This year USDA says it could go as low as $2.45.

Other commodities are doing even worse. Soybean prices will be at their lowest since the early 1970s. Corn prices are at the level of the mid-1980s slump.

Retail food prices, meanwhile, rose 4.4% in 1997 and then 2.2% last year, outpacing the overall rate of inflation both years, according to Labor Department statistics. So far this year they are rising at an annual rate of 1.6%.

The cost of labor is the driving force in the rise in food prices, as well as the growing gap between what farmers earn for their crops and what consumers pay for food, according to the USDA report.

Wages and salaries accounted for 49% of the cost of processing and marketing food in 1997, up from 46% in 1992, the USDA said. Corporate profits, as a share of the processing and marketing cost, dropped slightly over that five-year period.

In 1997 alone, the industry's labor costs rose 5.7%. Between 1992 and 1997, the average hourly wage of a food manufacturing worker went from $10.20 to $11.49 an hour in 1997.

“There is a tight labor market still. Not only food service outlets but food storage (facilities) are having some labor problems,” USDA economist Howard Elitzak said.

Food manufacturers have been consolidating and laying off workers in an effort to cut costs, said Gene Grabowski, a spokesman for the Grocery Manufacturers of America.

“The commodity price is just one variable of hundreds. Once it leaves the farm and eventually ends up on the fork you've got so many more steps and variables to raise the cost,” he said.

But while food costs are rising, and Americans more often are going to restaurants, they actually are spending less of their income than ever to eat.

The average family or individual spent 10.7% of their income on food in 1997, down from 11.6% a decade ago. Fifty years ago, food accounted for more than 22% of the household budget.

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