WATNE: Farmers face a pricing dilemma

I spent the end of May and early June with farmers around the world. We all like to say that agriculture is a global market, but we forget that we, as farmers globally, are actually quite similar in our quest for profitable operations. We “compete” with farmers around the world that face similar challenges in our operations. 

It is amazing that the issues to maintain a successful farm are similar but yet different in size, input access and scale. We all face the challenges of weather, prices and input costs. In each case, we rely on others to provide our inputs and to market our products. We also have minimal ability to pass on additional costs of commodity production and logistics to the market.

Farmers worldwide face a pricing dilemma. We have a billion chronically hungry people, a large need for renewable fuels, and it is still suggested that we lack demand to overcome supply. Farmers receive prices for commodities on overproduction in exporting countries, not based on the actual commodities’ need for demand. 

Some suggest that all commodities are priced on the first pound or bushel that is available to the market where there is no buyer or distribution system to move the product. 

Pricing to the lowest common denominator appears to minimize the opportunity for a commodity to ever reflect the true cost of production.

At these world conferences, we debated the value of food to the consumer, and by maintaining lower cost commodities, we inexpensively feed more people. 

I believe that commodity prices have lost a direct relationship to food prices. When commodity prices increase, food costs do go up, but rarely does the reverse happen that food comes down due to lower commodity prices. In fact, the cost of the commodities in our food is so low even doubling the commodity price would only have a minimal effect on the price of food.

In the interest of farmers worldwide, we need to find tools to match supply and demand. We need to address distribution challenges that limit our ability to feed the world, meet our renewable energy needs and utilize the large supply of commodities in exporting countries that burden commodity prices for all. We need to raise the standard of living in developed countries so they can become consumers that can meet and exceed their basic needs.

We need all family farmers, family ranchers and consumers to understand the value of a diverse and successful food production system. We should never force farmers and ranchers from their occupation because they are too good at production. This is so true when we are facing huge disruptions in trade, weather, population growth, energy demand and people starving. We can do better than this.

– NDFU President Mark Watne