Ontario Agriculture

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Here's a story from the 3 big general farm organizations out west...

Consumers paid $6.01 more for the same basket of groceries in 2009 than 2008, while farmers received 86 cents less, according to "The Farmers' Share" research project conducted by Keystone Agricultural Producers, the Agricultural Producers' Association of Saskatchewan and Wild Rose Agricultural Producers. A 3.2-per cent-increase in grocery cost was accompanied by a 1.7-per-cent decline in farmer returns.

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A comment I received about this information is below, which I have to say, I agree with the writer on most parts.
One way I explained it was " forgive me for learning about what is involved in retail and processing. The pricing mechanism has changed drastically since 2006 in the retail grocery sector"

One thing I will add - figures never lie, but liars... It is how you twist the information to your advantage...
Wayne

"Firstly, percentages have nothing to do with anything when it comes to the price of food - never have, never will. Percentages are just a way farmers delude themselves into thinking they are being shafted.
Furthermore, even in absolute dollar terms, farmers never seem to understand that retailing involves a whole raft of interchanges of prices, (and costs) not just for the product itself, but for substitutes.
In addition, food retailing often involves the use of loss-leaders or lead-in pricing on certain (often commodity based) items to increase traffic.
This means that in the overall marketing policy of any retail store, or group of retail stores, the price they pay for any particular product, and the price they charge for any particular product, doesn't have to, and often seems to not, have any relationship whatsoever. The only thing that matters is that the store make money, in the long run, on the aggregate range of things they sell - they lose on some, sometimes deliberately, sometimes inadvertently, and they gain on others, sometimes deliberately, sometimes inadvertently.
In addition, the percentages nonsense never includes any consideration of volumes of product available at any given time, as well as any consideration of either income elasticities of demand, or cross-elasticities of demand, as volumes of product coming to the market increase, or decrease, either because of domestic factors, or because of import/export factors."
Wayne - you've got a point here - however I your point about twisting information to your advantage -- I'll completely agree with. The reality is everyone does it - both sides - but I still think farmers tend to lose in the end. Look at it last year when prices hit the roof. Costs across the board went up - but only farmers seemed to get the blame for high commodity prices. Nothing about energy, packaging, etc -- all of which went up as well. It just seems that when prices go up - it's farmers fault - and then when our price comes down - well the store is a little slower at bringing their price down too.

Wayne Black said:
A comment I received about this information is below, which I have to say, I agree with the writer on most parts.
One way I explained it was " forgive me for learning about what is involved in retail and processing. The pricing mechanism has changed drastically since 2006 in the retail grocery sector"

One thing I will add - figures never lie, but liars... It is how you twist the information to your advantage...
Wayne

"Firstly, percentages have nothing to do with anything when it comes to the price of food - never have, never will. Percentages are just a way farmers delude themselves into thinking they are being shafted.
Furthermore, even in absolute dollar terms, farmers never seem to understand that retailing involves a whole raft of interchanges of prices, (and costs) not just for the product itself, but for substitutes.
In addition, food retailing often involves the use of loss-leaders or lead-in pricing on certain (often commodity based) items to increase traffic.
This means that in the overall marketing policy of any retail store, or group of retail stores, the price they pay for any particular product, and the price they charge for any particular product, doesn't have to, and often seems to not, have any relationship whatsoever. The only thing that matters is that the store make money, in the long run, on the aggregate range of things they sell - they lose on some, sometimes deliberately, sometimes inadvertently, and they gain on others, sometimes deliberately, sometimes inadvertently.
In addition, the percentages nonsense never includes any consideration of volumes of product available at any given time, as well as any consideration of either income elasticities of demand, or cross-elasticities of demand, as volumes of product coming to the market increase, or decrease, either because of domestic factors, or because of import/export factors."
You got that right Andrew!

Andrew Campbell said:
Wayne - you've got a point here - however I your point about twisting information to your advantage -- I'll completely agree with. The reality is everyone does it - both sides - but I still think farmers tend to lose in the end. Look at it last year when prices hit the roof. Costs across the board went up - but only farmers seemed to get the blame for high commodity prices. Nothing about energy, packaging, etc -- all of which went up as well. It just seems that when prices go up - it's farmers fault - and then when our price comes down - well the store is a little slower at bringing their price down too.

The challenge is what can we do about our shrinking slice of the food dollar....consumers are paying less now as a percentage of their disposable income and we get a smaller slice of the food dollar...
How much of the food dollar do we need?
It could be spun in a different direction. We get a small portion of the food dollar because we are so efficient and productive. With all the energy required in processing (transportation, electricity, handling at the warehouse & retail, heating or cooling bills at all locations...etc...) the smaller the amount of the food dollar we receive it must mean that we will get more opportunity to sell locally or to sell retail from the farm - less competition from imports.
I do not see that receiving the small portion of the food dollar is a complete negative. When food prices get jacked up due to inflation, we should accept no blame for the increase - because we get such a small portion of the food dollar.

Roadrunner said:
The challenge is what can we do about our shrinking slice of the food dollar....consumers are paying less now as a percentage of their disposable income and we get a smaller slice of the food dollar...
Spoken like a true industrialist. That line of reasoning works well for those who think that being the most efficient and productive will keep them in business. They also like to think that the processors are their best friends. Which they are, as long as you keep on producing that low-cost, quality product as long as they need it or you. But don't ever forget that when they can get it somewhere else for less money, they will throw you away like yesterday's flavor.

Then what good did your "efficiency" and "productivity" do you?
Percentages can play tricks. 2% of $200. today is still more than 3% of $100. 10 years ago. And technology has made dramatic yield increases. I would like to see farm product prices expressed in 1999 dollars. It think that the decrease in non supply managed products would be dramatic. There might be a decline milk and poultry prices.
I agree technology has improved efficiency but why must we always pass it on so readily to the processor, retailer and consumer? I would like to be a little more profitable.

Any response???
pigsrgr8 said:
Percentages can play tricks. 2% of $200. today is still more than 3% of $100. 10 years ago. And technology has made dramatic yield increases. I would like to see farm product prices expressed in 1999 dollars. It think that the decrease in non supply managed products would be dramatic. There might be a decline milk and poultry prices.
I agree technology has improved efficiency but why must we always pass it on so readily to the processor, retailer and consumer? I would like to be a little more profitable.

Any response???


I think of it this way - we are getting paid thirty year old prices for our products and paying our inputs in current-day costs. In 1978, I sold butcher cattle for $85/cwt.. Diesel fuel was 35 cents/GALLON. Rent was $45/acre. The new 4x4 pickup truck I bought was $8500 and paid for from the PROFIT of a barn full of fats.

I don't need to show you the present day figures, but I think one can easily figure out that our "efficiency" and "productivity" has in no way kept up to the inflated production costs even after taking into account FORD'S employee discounts.

The truth is that efficiency has just been a smokescreen to hide a disabled product value discovery system. In other words, we have no true marketplace anymore.
This is the way I look at it and I had to explain it to another farmer after they read the report to me:
When I go grocery shopping I buy whole milk, eggs in the shell as if it came out of the chicken, apples as if they came off the tree, tomatoes as if they came off the vine. Quite often some of these are offered as loss leaders. Therefore as a percentage of the grocery dollar the farmer is getting a large amount (relatively).
I do not buy whole grain corn, oats, wheat... etc. I buy cereal, oatmeal, corn chips - lots of processing involved. And as we all know, processing is comparative to manufacturing in this country - it is expensive.
The report states "Canadian consumers can choose what portion of their dollar is going back to support farm families by pausing to consider the farmers' share when selecting items at their local grocery store."
Another way of putting it: do not buy processed food products. The more processed a food product is - the less the farmer will receive because of the costs involved. Basic common sense. When you go through the list - it is that obvious. The more processing involved the less to the farmer - basic business.
By saying a processor is my friend - the processor in England is more of a friend to me because I get 20% more for my soybeans than the processor in Hamilton would pay. I can not and do not process my soybeans. I also do not buy whole soybeans with no processing at the grocery store or farmer's market. By encouraging further processing and "value added" I may or may not have more profit. But by not processing - I have no sale at all.
I do not eat whole grain or corn by itself. I eat whole apples, eggs, and drink milk.
By encouraging "value added through further processing" will absolutely end up with a smaller portion ending up in the farmer's pocket but could also mean more profit for the farmer.
It is like saying a corn farmer received a very small percentage of the grocery dollar in a litre of milk. Of course because the dairy farmer has processed that corn into milk! (& manure & meat)

burnt said:
Spoken like a true industrialist. That line of reasoning works well for those who think that being the most efficient and productive will keep them in business. They also like to think that the processors are their best friends. Which they are, as long as you keep on producing that low-cost, quality product as long as they need it or you. But don't ever forget that when they can get it somewhere else for less money, they will throw you away like yesterday's flavor.
Then what good did your "efficiency" and "productivity" do you?
We do get a smaller piece of the food dollar, and yet OUR costs increase dramatically. We, the farmer, are the ones who nuture the produce to make sure there is a quality product available for sale. We are the ones who choose the seed that is appropriate for our particular soil, we are the ones who hire the extra scouts for the fields to monitor for bugs and disease, on top of doing it ourselves--and then take the necessary action. We are the ones who have to deal with the fact that many of our trading partners are not required to follow the same stringent guidelines that we must adhere to for food safety, pesticide use, production, human rights, etc. When it is all said and done, why is the farmer the one who has to take the low price? When was the last time you heard about a farmer earning several million in the last quarter?

Roadrunner said:
The challenge is what can we do about our shrinking slice of the food dollar....consumers are paying less now as a percentage of their disposable income and we get a smaller slice of the food dollar...
Arguing against efficiency and innovation is a non-starter for me. But let me put this spin on the discussion. If you grow a pumpkin for food, each pumpkin is worth about a nickel. If you sell it for a jack-o-lantern, you can fetch $5.00. Cost of production is the same, but the end use dictates the value and the farmers share of the pie.

We have an apple orchard and for years we sold fancy grade apples to local grocery stores. We provided an excellent product, took returns, delivered every other day and after many years, some produce managers would walk away to save 5 cents a pound by buying through the warehouse. Now we press our apples into pastuerized cider - nice value add and lower production costs because apples don't have to be perfect for cider and picking costs are half.

My point is that if you are a price taker (commodity production like corn), then your only avenue to increase margin is to enhance productivity and efficiency. If you producing food (apples, etc.) then you have other avenues at hand to influence the price.
As we learned last summer, almost everything is worth more than food - fuel/energy being a prime example. Good debate.

Peter
A great example of changing with the times or changing to what your customer wants. One product that keeps coming to mind when a farmer tells me "they have to buy from me" is hoola-hoops. When I was in school almost everyone had one. Then - no one had one. Why? Didn't "need" it. (now we are starting to see them popping up in dollar stores). Did the gov't subsidize the hoola-hoop manufacturer to keep producing?
Yes we have regulations we need to follow, as do processors (listeria outbreak as a recent example). We also have mounting energy costs, as do retailers - fuel still costs the same for each of us.
But you bring up a valid point - value-adding on farm. A big question I constantly have in my head is: where does the term farmer and processor separate? Peter is a farmer who is processing apples. How does that differ from a processor growing their own apples? (replace apples with pigs or beef for more to the point).
Say I am a shareholder in a company who does processing. As a farmer I am a (small) part owner of a processor also. If that processor contracts a "farmer" to feed his cattle, how is that any different than a neighbour feeding cattle for me?
So really - the term "percentage of the food dollar to the farmer" is of less importance than the actual dollar at the end of the day. As it is illustrated above by pigsrg8 - he would rather have 2% of $200 than 3% of $100. The percentage has dropped but the return has in fact increased. We all know that there is more money moving through our hands. If you disagree - try and buy a farm. There is your millions. "Asset rich, Cash poor" same thing for many decades.

Peter Gredig said:
We have an apple orchard and for years we sold fancy grade apples to local grocery stores. We provided an excellent product, took returns, delivered every other day and after many years, some produce managers would walk away to save 5 cents a pound by buying through the warehouse. Now we press our apples into pastuerized cider - nice value add and lower production costs because apples don't have to be perfect for cider and picking costs are half. Peter

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