Never Underestimate Productivity of the American Farmer

As Thanksgiving approaches, it's important to keep in mind that the American farmer produces the food that we eat daily and during holiday feasts. Unfortunately, farmers are too frequently criticized, unfairly and inaccurately.
By Tom Buis | November 23, 2013

The holidays are a special time in this country. It’s a time to gather as a family, count blessings and make memories. It is also a time traditionally marked by great meals. These feasts come from the farmers of America.

Farmers are the backbone of our country. They are what make our nation strong, united and prosperous. Not only do they put food on our tables, but they are leaders in providing direct and indirect domestic jobs, technical advancements and, yes, energy for our needs.

Too often our farmers are at the wrong end of criticism. They are blamed, unfairly and inaccurately, for turning food into fuel. Just last year, amid a devastating drought that adversely impacted crop production throughout much of the United States, corn farmers were scorned for diverting cropland for ethanol. Nothing could be further from the truth. 

Blatant misstatements were tossed around as facts. For example, exaggerated claims that 40 percent of the corn crop is utilized to produce ethanol have been stated as gospel. Reality tells a different story. Once the real facts emerged it became apparent—after accounting for coproducts, production efficiencies and new technologies—only 17 percent of U.S. corn acreage is actually required to produce the ethanol feedstock.

One year later and American farmers’ hard work, sacrifices, ingenuity and, yes, a return to more normal weather, has resulted in a gigantic corn harvest. Now, corn prices are down to lows not seen in years. Such a harvest reaffirms what we in the ethanol industry have known all along: American farmers are more than capable of producing abundant supplies of food, feed, fiber and fuel.

Yet despite such accomplishments by our farmers that have resulted in greater supplies and lower market prices, the cost of the food we eat over the holiday season is unlikely to reflect anything close to the discounted prices our farmers are experiencing. In fact, prices for the food staples we all love and enjoy throughout the year haven’t gone down with the corn price.

How could that be? Simple. The driving cost of food isn’t actually tied to the price of farm commodities, such as corn. And certainly isn’t tied to ethanol.

The biggest driver of food costs is oil. Researchers from the World Bank identified crude oil as the No. 1 determinant of global food prices. When the price of oil goes up, so do food prices. 

Additionally when one looks at the actual food dollar and breaks it down into shares of the pie, you can see clearly that agriculture is only a small contributor to the overall price. In fact, only 16 percent of what you pay at a store can be tied to the farm. The rest are costs like energy, transportation, packaging and marketing.

Of course, one of the biggest reasons behind food prices remaining high might be the least surprising, profits. Food conglomerates have enjoyed increased profit margins thanks to rising retail prices that are outpacing rising farm costs. During the 2012 drought, the farm value of chicken increased about 2 cents per pound compared to 2011.  Wholesalers and retailers, such as fast food restaurants, increased their prices by about 13 cents per pound.  Consumers paid an additional 8 percent, leading to higher profit margins for the food industry. For instance, Tyson Foods, the largest U.S. meat processor, is predicted to report a 37 percent gain in profit to $797.6 million in 2013. 

If we really want to reduce prices at the grocery store then we must lean on our farmers even more. We must turn to them to continue to produce more food and more fuel, so that we can end our oil dependence and the stranglehold Big Oil and Big Food have over our household budgets.

Farmers can produce what we need. This harvest certainly proves that. It’s up to consumers and Washington to realize the contribution American agriculture makes to our economy and society and to do what is right. 

We must continue to protect American agriculture, protect the RFS and ensure there are no changes made to this vital program. Furthermore, we must break through the blend wall and promote higher blends of renewable fuels in the marketplace, such as E15, to protect the biofuels industry and ultimately, American agriculture and food from the farm. 

Remember that as you enjoy your holiday feast.  

Author: Tom Buis
CEO, Growth Energy