Farmers suffer as consumers benefit from low food prices

According to USA Today, consumers are reaping some benefits as farmers take their biggest hit in 35 years: lower food prices at the supermarket. The U.S. Department of Agriculture forecasts farm income of $49.1 billion in 2009 when adjusted for inflation. That would be a 39% drop from 2008, a record year when U.S. farmers earned $80.4 billion after expenses. It would also be the worst annual percentage drop since 1983. In dollars, it would be the worst since 1974, adjusted for inflation.

Consumers are benefiting a little from farmers’ troubles, says Richard Volpe, a researcher in the Department of Agricultural and Resource Economics at the University of California-Davis. Supermarket prices on pork and dairy products are down, he says, but nowhere near as much as the lower prices farmers are getting for their products. Volpe says competition among supermarkets battling for consumers in the recession has more to do with the falling food prices.

The price drop has hit every sector of farming, but hog and dairy farmers have seen the sharpest declines. Both had benefited from exports to emerging markets abroad and were hurt by the global recession, says Mitch Morehart, an agricultural economist with the USDA. Meanwhile, he says, expenses remained high.