A22-LancMter Farming, Saturday, September 10, 1988
THE DROUGHT AND
FOOD PRICES
H. Louis Moore,
Agricultural Economist
The Pennsylvania
State University
It is always
hazardous to as- * ’JTjB
sess drought dam- : jL
age prior to com
pletion of harvest
The difficulties of
making an assess
ment this year are
compounded by the unusually ear
ly occurrence of the drought In
past years, droughts came in mid to
late summer. This year the dry
conditions became evident in
many areas in April and May and
were relentless until July 18th.
Time will tell whether the back of
the drought was broken by the
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mid-July rains or whether August
will be a continuation of the earlier
dry weather.
Unlike past years when there
were pockets of droughts, this year
has been one where drought is fair
ly general and there are only pock
ets where the weather has been
normal. Major droughts typically
lead to an acceleration in the rate of
food price increases. Consumers
know this from past experience
and ask, “How much will food
prices rise in 1988 as a result of
drought and should I begin to
stockpile some items which are
likely to become very
expensive?”.
Food prices, even before the
drought began, were projected to
rise 3 to 5 percent in 1988 after ris-
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ing 4.1 percent in 1987 and 3.2 per
cent in 1986. Food prices rose in
1986 and 1987 despite declines in
the farm price of food items. The
past increases in food prices repre
sent things that happen to food
items beyond the farm gate. The
costs of processing, storage, trans
portation and retailing have a grea
ter effect on food prices than what
happens on the farm. These costs
after the item leaves the farm rep
resent about 70 percent of the food
dollar spent at the supermarket. So
the 4.1 percent rise in food prices
in 1987 resulted from increased
costs of labor, food packaging,
advertising and the desire of the
food industry to improve profits. It
was expected that these costs
would continue to rise in 1988,
which led to the projection that
food prices would rise 3 to 5 per
cent in 1988.
How much more will food
prices increase as a result of
drought? The current expectation
is that on average prices will rise 1
to 2 percent as a result of drought
Why so little? A major factor that
dampens a surge in food prices is
the comparatively minor share of
retail food expenditures that is rep
resented in the farm value of food
items. Since the marketing system
accounts for about 70 cents of
every dollar consumers spend for
food, the farmer gets only 30 per
cent. The farm value has steadily
fallen from about 37 percent in
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Consumers will see the biggest
price increases in fresh fruits and
vegetables which are grown local
ly if the area is suffering extensive
ly from drought Very highly pro
cessed items should show very
small increases. Cereal and bakery
items, for example, are highly pro
cessed and the farmers share of
each dollar consumers spend for
the items is just 9 percent There
fore, if these items normally have S
to 10 cents of flour in them and
flour prices increase 40 percent the
cost would go up by about 4 cents.
Ag Awareness Day
FLEMINGTON, NJ Ag
Awareness Day spotlights two
farms in southern Hunterdon
County.
Again, the Hunterdon County
Board of Agriculture and Rutgers
Cooperative Extension will spon
sor Ag Awareness Day in southern
Hunterdon County. On Saturday,
September 10, from noon until
5:00 p.m., rain or shine, two farms
will open their gates to show off
the diversity and viability of Hun
terdon County agriculture.
Woods Edge Wools, owned by
Fred and Linda Berry Walker will
have walking tours, exhibits and
displays, and sheep, llamas and
guard dogs to see. Their farm is
located on Bowne Station Road.
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But flour prices shouldn’t increase
40 percent because we have
harvested an excellent wheat crop
and there are adequate supplies of
wheat in storage from previous
years.
But a consumer says, “That
makes economic sense but our loc
al supermarket has already
increased the price of bread by 8
cents a loaf because of the
drought” As an economist I would
have to answer, “The drought
created an excuse for that price
increase but not an economic
reason.”
Whistle Stop Farm and Nursery
on John Ringoes Road in Ringoes
is owned by Greg and Dena Scibil
ia. They will have walking tours,
hay rides, washing and packing
line demonstrations and irrigation
demonstrations. Their farm is
adjacent to the Black River and
Western Railroad.
‘The lours are free and we
encourage friends and neighbors to
visit these nearby farms,” says
Susan Blew, Piltstown farmer and
chair of the Ag Awareness Day
Committee. She adds, “see what
different kinds of farming are suc
cessful and non-tradilional in Hun
terdon County.
Call Elaine Fogerty Barbour,
210/788-1338.
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