Barr, Wallace

Simonds, Lois

Watkins, Edgar P.

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APRIL, 1974 PRESENTATION AIDS ON RISI NG FOOD PRICES -- SOME I MPLI CATIONS by WALLACE BARR LOIS SI MONDS EDGAR WATKINS EXTENSION ECONOMISTS, ESQ - 190 DEPARTMENT OF AGRICULTURAL ECONOMICS AND RURAL SOCIOLOGY, THE OHIO STATE UNIVERSITY IN ASSOCIATION WITH THE OHIO COOPERATIVE EXTENSION SERVICE 2. RISING FOOD PRICES -- SOME IMPLICATIONS FOOD PRICE RISES -- HOW MUCH?? FEB. '73 -- FEB. '74 ALL FOOD 20. 2 % FOOD AWAY FROM HOME 13. 3 % FOOD AT HOME 22. 2 % MEAT, Fl SH, POULTRY 22. 0 % DA I RY PRO DUCTS 23. 4 % CEREAL & BAKERY PRODUCTS 31.1 % FRUITS & VEGETABLES 17.0% WHO DID THAT TO US ?? WHY?? 3. CONSUMER PRICE INDEX COMPARISONS 1967 - FEB . '7 4 I CONSUMER PR I CE INDEX INCREASE I 51% I FOOD 58% I HOUSEHOLD SERVICES 49% I INSURANCE AND Fl NANCE 58% I CLOTHING I 3(Yfo I MEDICAL CARE I 43% I RENT I 28% I HOUSEHOLD DUR. I 22% I HOUSEHOLD & HOME MAINTENANCE srnv1cd 57% I NEW CAR~ 13% I GAS & 01 L I 47% WHO DO CONSUMERS BLAME FOR HIGH FOOD PRICES ? (SURVEY AT TIME OF MEAT BOYCOTT) - - CONSUMERS BLAME: FARMERS RETAILERS FOOD PROCESSORS LABOR CONSUMERS DON'T KNOW 8% 14 % 25 % 45 % 15 % 17 % * MORE THAN ONE ANSWER PERM 1TIED - - MORE RECENTLY CONSUMERS HA VE BLAMED GOVERNMENT POLICY-ACTIONS 4. s. FAMILIES HAVE MADE CHANGES 1972/1973 -- FOOD PRICES + 20 % -- FOOD EXPEND I TURES + 11-12 % -- USE PER PERSON - 1 112 % SOME SHIFT IN DIETS HAD TO OCCUR FACTORS IN RISING FOOD PRICES WORLD S ITUA Tl ON POOR WEATHER: FISHING MORE PEOPLE: + 2 % PER YEAR RISING INCOMES:+ 3 % PER YEAR BETTER DIETS: MEAT DEVALUATION INCREASED TRADE $ 9 BIL. TO $17 BIL. (1973 CALENDAR) 1/6 TO U.S. S. R.: 5/6 TO REST OF WORLD DOMESTIC FACTORS POOR 1972 HARVEST WEATHER: 1973 PLANTING ENVIRONMENTAL CONTROLS: DES INCOMES: FOOD STAMPS: SOCIAL SECURITY BOYCOTTS: PRICE CEILINGS LESS MEAT: MORE OTHER FOODS HAD GRAINS: FACILITIES 6. WHY DOES FOOD COST MORE? -- EATING MORE: +(f/o PER PERSON -- SHIFTING DIETS LAST 10 YEARS: + 8 % + l(f/o + 37 % 7. PORK BEEF POULTRY RESULT +150 LBS. MORE FOOD PER FAMILY -- BUILT-IN MAID SERVICE: PACKAGED IN RIGHT SIZE PRECOOKED & READY TO SERVE SNACKS -- EATING OUT: + 30 % -- HIGHER PRICES -- I NFLA Tl ON OF 51% HOW MUCH INCOME GOES FOR FOOD ? * ANNUAL INCOME AFTER TAXES FAMILY SIZE $3,000 $10,000 $20,000 (PERCENT FOR FOOD) YOUNG COUPLE 42 % 13 % 6% OLDER COUPLE 35 % 10 % 5% FAMILY OF 4 (2 Preschoolers) 61 % 18 % 9% FAMILY OF 4 (2Teenage Girls) 83 % 25 % 12 % FAMILY OF 6 (2 Preschoolers, 2 School Age) 88 % 26 % 13 % f.• BASED ON USDA LOW-COST FOOD PLAN co . COST OF FOOD AROUND THE WORLD UNITED STATES CANADA SWEDEN UNITED KINGDOM FRANCE ITALY JAPAN U.S.S.R. TAIWAN 0 10 20 30 40 50 60 '° . PERCENT OF SPENDABLE INCOME FOR FOOD 10. SOME EFFECTS OF 1973 MEAT BOYCOTT WEEK LITTLE MEAT PRICE CHANGE REDUCED MEAT SALE~ INCREASED NON-MEAT SALES: HIGHER PRICES LAYOFFS OF MEAT CUTTERS: BUTCHERS LIVESTOCK MARKET! NGS REDUCED FARMERS NERVOUS POLITICIANS "JUMPY": PRICE CONTROLS CONSUMERS EXASPERATED SOME EFFECTS OF CONTROLS -- FOOD RETAILERS UNCERTAINITY ABOUT SUP PLIES: PRICES PROFITS SQUEEZED FINANCING DIFFICULT: EFFICIENCY POSTPONED -- MEAT PROCESSORS GREY MARKET CLOSED: MAY NOT OPEN -- CONSUMERS BOYCOTTERS: HOARDERS CHANGED DISTRIBUTION 11. -- DISTORTED MARKETS AND MARKETINGS IN 1973 & 1974 BEEF: PORK: POULTRY DEVALUATION EFFECTS PRICES REVALUATION MEANING TO MID-1973 . CHEAPER U.S. PRODUCTS MORE INDUSTRIAL EXPORTS EXPANDS AGRICULTURE SALES • HIGHER PRICED IMPORTS FEWER IMPORTS: CARS, ETC. BUILD PLANTS IN U.S. INTERDEPENDENT • U.S. AGRICULTURE IS WORLD'S MOST EFFICIENT IN FEED GRAIN; SOYBEANS & WHEAT . AGRICULTURE EARNING FOREIGN EXCHANGE . AGRICULTURE PAYS FOR ENERGY JOBS: HOMES: CARS 12. FOREIGN CURRENCIES VS. THE DOLLAR ($) % JAN. 1973=100 140 /' % JAN. 1973=100 140 I 130 ~ 120 ~ I llO ~ 100 90 / I "---GERMAN ~ NETHERLAND MARK GU I LDER /-- __/ //~~---I JAPANESE YEN ,¥ -- _,,.._ - ----------, ..... ' ~ - .,....-- .. -·--..._ . ·--~ __ .__,...,., ·?--· '----, -- 7' -· -. _...-- --BRITISH POUND .....__ -......_ ................ • L IWE'R~OSING ADVANTAGES ! _. --A------'t-- r J F M A M J J A S 0 N D J* * BASED ON JANUARY 7, 1974, EXCHANGE RATES. 130 120 110 100 90 I-' VJ . RUSSIAN GRAIN PURCHASE EXPORTS IN 1972-73 SALES TO U.S. S. R. QUANTITY: REASONS: WHEAT CORN SOYBEANS WEATHER +$ 6 BIL. OVER 1971-72 + $1.l BIL. 440 Ml L. BU. 280 Ml L. BU. 40 Ml L. BU. ECONOMIC SYSTEM CHANGING PRIORITIES FUTURE TRADE: U.S.S.R. EXPAND BUT ERRATIC 1973-74: VALUE HALF OF 1972-73 PEOPLES REPUBLIC OF CHINA EXPAND 1973-74 OVER $ 1.1 BILLION 14. 15. BREAD COSTS AND WHEAT PRICES ? Ingredient Costs: 1 lb. loaf White Bread Farm Price of Wheat/BU. $3.50 $6.00 RETAIL PRICE OF BREAD 28¢ 35¢ FARM VALUE, ALL INGREDIENTS 6.6¢ 10.1¢ FARM VALUE, WHEAT 5. 2 t 8. 7¢ COST TO BAKER, ALL I NG RED I ENTS 8. 7 <t 12. 7 <t FLOUR 6.1¢ 10 ¢ WHAT DOES THE FU EL CRISIS MEAN TO FOOD COSTS? ENTIRE FOOD SYSTEM USES ABOUT 12 % OF U.S. TOTAL ENERGY REQUIREMENTS -- FUEL COST: 5 - 6% OF RETAIL FOOD PRICE EACH DOUBLING OF FUEL PRICE: FOOD PRICES I NC REASE 7 TO 13 % I NC REASE DEPENDS UPON FUEL NEEDED: FOR PRODUCING AND PROCESSING PRODUCT FOR MORE FARM SUPPL! ES (Fertilizer, petroleum-based chemicals) 16. FOR NATIONAL AND INTERNATIONAL TRANSPORTATION DI STR I BUTI ON OF ENERGY USE IN FOOD INDUSTRY FRUITS DAIRY 16% and ·VEGETABLES 18% MEAT, POULTRY, Fl SH 27% 10% ALCOHOLIC BEVERAGES 10% 17. WORLD ENERGY SHORTAGES AND U.S. FARM TRADE POSITIVE EFFECTS RAPIDLY RISING FOOD PRICES: FEW BARRIERS EXPAND LIVESTOCK: MORE GRAIN SHORTAGES OF MAN-MADE Fl BERS: MORE COTTON SHORTFALL OF FERTILIZER: SELL GRAIN NEGATIVE EFFECTS CURTAILED GROWTH AND INCOMES IMPROVING DOLLAR MEANS PRICE RISES HIGHER FREIGHT RATES MASSIVE BALANCE OF PAYMENTS DEFICITS WEATHER UNCERTAINTlES?? 18. 19. FOOD POLICY -- EXPANDING ACREAGE IN 1973 GOAL . MEET DOMESTIC AND FOREIGN FOOD & FEED NEEDS FARMERS CAUTIOUS • REMEMBER "FEED THE WORLD" OF l 960'S • POOR WEATHER & FISHING WON'T CONTINUE . DIDN'T WANT TO OVERDO GOVERNMENT ACTIONS IN 1973 . SOLD CCC GRAIN (RESERVES) • ALL CCC LOANS EXP I RED . RELAXED SET-ASIDE + 42 Ml L. ACRES + 23 MIL. IN GRAINS: 25 MIL PLANTED ADVERSE 1973 PLANT I NG SEASON 20. RESULTS OF FOOD POLI CY IN 1973 -- EXPANSION ACRES OUTPUT CORN 61.7 /V\IL. (+7%) + 1% SOYBEANS 56.4 /V\IL. (+22o/o) +23% WHEAT 53.7 /V\IL. (+13%) + 7% TOOK /V\ORE INPUTS 500, 000 NONFARM JOBS: I NCO/V\E NONFAR/V\ CO/V\/V\UN ITV GA I NED HIGHER FARM I NCO/V\E 1973 = + 30-35 %: 1974 DONN SO/V\E HIGHER PRICES TO CONSU/V\ERS OF 20 % I NC REASE DO/V\ESTI C: ABOUT 15 % FOREIGN ABOUT 5 % SOVIETS : ABOUT 1 % 197 4 FOOD SETTING -- GOVERNMENT ACTION . NO SET - AS I DE REQUIRED: NO CONSERVING BASE • NET EFFECT + 20 MIL. ACRES • TOTAL ACRES RELEASED 62 MIL. ACRES • YIELDS (80 %) MARGINAL LAND BEING PLOWED UNCERTAINTIES IN 1974: BEYOND • ENERGY AND FERTILIZERS AVAILABILITY: COSTS . INTERNATIONAL MONETARY POLICY RESULTS • LOW FOOD STOCKS AROUND WORLD IN 1974 • 1974 A 'GOOD" YEAR FOR AGRICULTURE 21. LOOKING AHEAD ?? ONE TO THREE YEARS HENCE ADVERSE WEATHER NOT PERMANENT LONG-RUN FOREIGN DEMAND INDUSTRIALIZED: COMMUNIST REVALUATION IN 1974 SUPPLY RESPONSE IMPORTING COUNTRIES EXPORTING COUNTRIES RESULTS HIGHER PRICES THAN 1966-72 HIGHER & RISING COSTS: INFLATION MORE PRICE FLUCTUATIONS MANY BUSINESSES SQUEEZED 22. 23. FARM PRODUCTIVITY AND FOOD OUTPUT HIGH: BUT SLOWING DOWN (1967 = 100) OUTPUT/ACRE OUTPUTIUN IT OF INPUT 5-YR. PERIOD INDEX INDEX % PREVIOUS 5 YRS. 1950-54 71 75 xx 1955-59 80 85 12.7 % 1960-64 93 95 12.2 % 1965-69 102 100 4.6 % 1970-73 111 105 4.9 % NOW US I NG MORE RESOURCES TO GET HIGHER OUTPUT POSSIBLE REASONS FOR SLOWDOWN IN OUTPUT BEST TECHNOLOGIES USED ECOLOGY RESTRAINTS NON-FARM USE OF GOOD FARM LAND LOW COST GRAZING LAND SCARCE -- MEANS HIGHER FARM AND FOOD PRICES FOOD EXPEND I TURES AND INCOME INCOMES HAVE GONE UP FASTER THAN FOOD EXPEND I TURES % DISPOSABLE INCOME YEAR SPENT FOR FOOD 1930 24.2% 1950 22.2% 1970 16.2% 1971 15.8% 1972 15. 7% 1973 15. C/10 1974 16-17% -- IS THE ERA OF 11CHEAP FOOD" END I NG? WI LL INCOMES RI SE FASTER THAN FOOD EXPEND I TURES? 24. U.S. FOOD POLICY GOALS PRODUCE ABUNDANTLY AND EFFICIENTLY FOR U.S. CONSUMERS -- PRODUCE FOR EXPANDING WORLD MARKETS -- MAINTAIN DEPENDABILITY AS A WORLD SUPPLIER PROVIDE FOR HUMANITARIAN NEEDS AT HOME AND ABROAD -- IMPROVE FARM INCOMES AND RURAL COMMUNITIES 25. BACKUP TO U.S. FOOD POLICY CROPLAND USED: 330 Ml L. ACRES ADDITIONAL ACREAGE POTENTIALLY AVAILABLE: 400 MIL. ACRES I OLE LAND: 50 Ml L. CROPLAND PASTURE: 90 MIL. NON-CROPLAND SUITABLE FOR CROPS: 260 MIL. -- HIGHER YIELDS ONLY: +50 % IN OUTPUT APPLY PRESENT KNOWLEDGE 1972 Avg. Top lCY'/o % of Avg. CORN 97 bu. 143 bu. 148 % WHEAT 34 bUo 51 bu. 149 % SOYBEANS 28 bu. 45 bu. 160 % DEVELOP NEW TECHNOLOGY CROPS: 26. HYBRIDS, HIGHER PROTEIN DISEASE RESISTANT LIVESTOCK: REQU I REMENT MULTIPLE BIRTHS, BETTER FEED I NG, CROSS BREEDING HIGHER FARM AND FOOD PRICES TO SUM UP: WE A RE AFFLUENT (HA VE MONEY) WE WANT MEAT: BEEF HIGHER DEMAND = HIGHER PRICES NO EXCESS PROFIT IN FOOD SYSTEM INFLATION IS A FACTOR PRICE CONTROLS COUNTER PRODUCTIVE NOW FOOD POLI CY: NOT FARM POLI CY U.S. HAS PRODUCTION CAPACITY TAKES MORE RESOURCES: HIGHER PRICES FARM EXPORTS NEEDED BUY ENERGY: JOBS, HOMES, CARS 27. 

Presentation Aids on Rising Rood Prices -- Some Implications

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Presentation Aids on Rising Rood Prices -- Some Implications

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