“Especially for fresh agricultural goods, time to market is essential. It’s not like you can watch the price of diesel and transport your goods accordingly,” said Bruce Bullock, director of the Maguire Energy Institute at Southern Methodist University. “You are held hostage to those costs.”
Fuel prices are a major component of food production—nearly half of retail food price increases (44 percent) come from fuel, transportation and energy costs. Comparatively, raw farm products contribute less than a third (29 percent).
Rising fuel prices affect every stop in the food production chain, starting in the field where the crops are grown. Farmers and ranchers are paying more for basic business inputs like diesel to power equipment and fertilizers that foster plant growth. Manufacturing and processing facilities also must account for the rising cost of fuel.
“As those prices go up, it costs more and more money just to get the food product to the grocery store shelf. The farmers’ and rancher’s share of that consumer dollar is very, very small,” said Central Texas cattle rancher Lloyd Huggins. “The rest of that cost is going to the people in between who take the raw product and turn it into something consumers really want to eat.”
Commodity prices also have been increasing, due to rising global demand and recent supply disruptions around the world. Although the costs of raw farm products are higher, processed foods are more likely to post noticeable price increases.
“We’d expect to see goods with a higher degree of processing to them, like breakfast cereals and pre-packaged, pre-cooked materials, to go up faster than a five-pound bag of flour,” said Jim Sartwelle, Texas Farm Bureau director of Public Policy. “Those products have a lot more processing, transportation and marketing costs.”
Ultimately, food prices are expected to level out, and consumers can expect to pay only slight increases over the long term. As for the men and women who grow our food, they will continue providing the fresh produce, grains and dairy products that stock our grocery store shelves, while trying to maintain profitable and lasting businesses.