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ARM AND Q anch F I ULLETIN April 15, 1958 Vol. 13, No. 4 W H Y M A R K ET IN G C O S T S STAY H IG H In a recent report entitled Farm-Retail Spreads for Food Products, the Agricultural Marketing Service throws some light on such perennial questions as: ^ Why do farmers receive a compara tively small part of the dollar consum ers pay for many food products? Why do retail prices often stay up when prices received by farmers de cline? The difference, or spread, between the re tail price of a product and the payment the farmer receives goes to a large number of people who move the product from the farmer to the consumer, including local assemblers, food processors, wholesalers, and retailers. The resources used by these marketing agen cies—labor, processing plants, transportation, and equipment— sometimes are more costly than the resources used by the farmers in the production of the crop. This is particularly true of commodities that require extensive process ing. Even an unprocessed product, such as let tuce, often incurs major expenses, resulting from long transportation hauls, refrigeration, etc.; consequently, its marketing cost exceeds the farm production cost. In 1957 the Nation’s farmers received an average of 40 percent of the retail price of food products— that is, 40 percent of the dollar the consumer spent for food. Marketing agen cies received 60 percent. F E D E R A L R E S E R V E DALLAS, The percentages vary widely with the food product group. The farmer’s share generally is higher for meat and animal products than for foods derived from crops. For example, in 1957 the farmer’s share for eggs was 67 per cent but was only 17 percent for bread. More expense is involved in producing a dozen eggs than in raising wheat for a pound-loaf of bread. On the other hand, marketing agencies per form an expensive two-stage manufacturing process— milling and baking— to convert the wheat into bread, but they have no such prob lem in selling eggs at the retail grocery. This does not mean that the income (net return) of the farmer who produces eggs is necessarily larger than that of the farmer who grows wheat, since the poultryman’s produc tion costs also may be higher. The farmer’s share of the consumer’s food dollar has declined since 1950, when he re ceived 47 cents. In 1957 the farmer received 7 percent less for food products than in 1950, while m arketing charges (the farm-retail spread) rose approximately 25 percent. The smaller share of the consumer’s dollar spent for food which the farmer receives as compared with earlier years is partly the result of farmers’ shifting some of the marketing functions pre viously p e rfo rm ed by them to marketing agencies. Marketing costs are largely independent of the supply and demand factors which influ ence prices received by farmers. For this rea son, retail prices may continue high, even B A N K TEXAS OF D A L L A S Another reason why the total bill for mar keting farm food products has increased is that marketing agencies are handling more food and performing more services than they did in 1940. The volume of food products marketed from the Nation’s farms has in creased 50 percent since that year. The popu lation has risen only 30 percent; thus, the amount of food marketed per capita has in creased. when the farmer is receiving less for his prod ucts. Many marketing costs— such as wages, leases, freight rates, and public utility rates— are relatively inflexible, since they are fixed over a period of time by contracts or by regu latory agencies. During inflation periods, many marketing costs do not rise as quickly as do farm prices; but they also decline very slowly. There prob ably are more rigidities in marketing costs today than ever before. For example, depre ciation charges are higher, and, in a few cases, a guaranteed annual wage has to be con sidered. Labor costs comprise about half of the farmretail spread. In 1957, these costs were 19 percent higher per unit than they were in 1950. Hourly wages were up about 40 percent, but because of increased productivity, the rise in cost per unit of output was only half as great. Transportation costs (which make up about an eighth of the farm-retail spread) were up approximately a fourth. Costs of fuel and electric power, containers and supplies, build ings, machinery, and equipment rose an average of 30 percent. Rents, taxes, and advertising were among other costs which were substan tially higher. Corporate profits have accounted for 5 to 10 percent of the food marketing bill. Taxes have taken about half of these profits in most post-World War II years. The nonfarm population has risen almost 50 percent since 1940, while the number of per sons living on farms has decreased one-third. Since farm families usually produce part of their food, ex-farmers who are now nonfarm residents purchase a larger amount of food from marketing sources. A greater volume of food is being processed and ready prepared than formerly, and more meals are being eaten in restaurants. These factors result from (1) a continued high level of employment and consumer incomes and (2) the employment of more housewives outside the home. According to the Agricultural Marketing Service, not all extra processing adds to the cost of food. In some instances, processing costs may be offset by a reduction in waste and spoilage and the lower costs of shipping. Device M ay Tell W hen to Irrigate The use of a simple electrical device, tested recently by the United States Department of Agriculture, someday may help farmers de termine when to irrigate their crops. The in strument measures moisture stress— an indi cator of a plant’s moisture needs. Two small prongs of the device are stuck into the stem of the plant in order to make a rapid reading of the plant’s water requirements. The prongs are two stainless steel electrodes connected to an ohmmeter, which measures the electrical resistance in the plant. (The lumber industry uses a similar instrument to measure moisture in wood.) In experiments with cotton plants, electrical resistance went down as moisture amounts went up. Within 4 hours after irrigation, a I sharp drop in resistance was observed on the ohmmeter. Further studies are being conducted by the Agricultural Research Service with the aim of making the electrical device easy to use by irrigation farmers. Tanning Agent from Corn Corn, a kingpin in the production of our four-footed domestic animals, has stepped into the picture as a tanning agent to help turn their hides into new and superior types of leather, reports the Texas Agricultural Exten sion Service. Dialdehyde starch, a new corn product de veloped by the United States Department of Agriculture, shows great promise for the pro duction of garment and glove leathers with unique properties. Cooperative work with com mercial tanners is under way. The United States is completely dependent on other countries for tanning agents; there fore, a tanning agent from a domestic crop that is always available, frequently in surplus, would offer definite economic advantages. In addition, it would open up new possibilities for leather use. Red and Yellow, Kill a Fellow! Poisonous Snakes in Texas, a leaflet published recently by the Texas Agricultural Exten sion Service, tells how to iden tify the more poisonous snakes and what to do when bitten by a snake. Rattlesnakes, copper heads, water moccasins, and coral snakes are the poisonous species in Texas which are con sidered dangerous. The coral snake has yellow, red, and black rings encircling the body. The yellow ring al ways touches the red ring, which is not true of similar nonpoisonous snakes. A good slogan to remember is “Red and yellow, kill a fellow.” Moccasins normally are found near water and, contrary to popular belief, can bite under water. If a person is bitten by a poisonous snake, first-aid treatment should be admin istered immediately. Leaflet L-354 contains additional descrip tions and characteristics of the snakes, as well as instructions on first-aid treatment. Copies may be obtained from offices of local county agricultural agents or from the Agricultural Information Office, College Station, Texas. New Practices Control Peanut Stem Rot Stem rot of peanuts has cost growers in the southern states $10 million to $20 million an nually, according to the United States Depart ment of Agriculture. Improved cultural prac tices for controlling the destructive disease— also known as southern blight— recently have been developed through cooperative research by the Department of Agriculture and the State A gricultural Experim ent Stations of Georgia and Virginia. The new control measures consist of: k Plowing fields so that all surface de bris is covered with clean soil to a depth of 3 to 4 inches. ★ Planting on flat beds or on slightly raised beds. 'k Cultivating so that no soil is thrown against the base of the plants during the growing season. These soil management practices have sub stantially decreased the incidence and severity of stem rot diseases. In experiments in Georgia during 1956, the measures resulted in a 32percent gain in the yield of Spanish peanuts. In Virginia, use of the practices resulted in an 80-percent increase in the yield of Spanish pea nuts and a 7 8-percent gain in yields of Vir ginia bunch peanuts. Bulk Handling of Milk Stepped Up The trend toward bulk cooling and handling of milk on dairy farms has proceeded at a phenomenal rate, and market analysts predict continued conversion in most markets during 1958, states A. M. Meekma, Extension Dairy Husbandman of the Texas Agricultural Exten sion Service. The rapidity of conversion has surprised market analysts because of the considerable re organization, added investment, and increased initial cost involved. These factors have caused mixed reactions among farmers, and the shift has not been uniform in all areas. Mr. Meekma says that large producers gen erally convert to the bulk tank system more readily than do smaller operators. Producers usually expand their herds when this system is installed. Storm Cellar Good Insurance Many persons who have seen the destructive black funnel of a tornado rushing directly to ward their homes or have experienced similar disasters had never realized the value of a safe place, just as “we never miss the water until the well goes dry.” A storm cellar can be con structed easily without special skills and with only a few special tools, according to the Texas Agricultural Extension Service. Since tornadoes usually move from south west to northeast, the storm cellar should be located southwest of the house. For an ex tended period of occupancy, 10 square feet of floor area should be allowed for each person; only about 2 square feet per person are re quired for short occupancy. Storm cellars should be strong enough to withstand the im pact of falling debris and should be watertight, economical, and relatively easy to maintain. Instructions on building a storm cellar, to gether with information on other uses for the cellar, are contained in Leaflet L-388, The Disaster Cellar, published by the Texas Agri cultural Extension Service. Copies of this re lease may be obtained from local county agricultural agents or from the Agricultural Information Office, College Station, Texas. these selected grasses in combinations may be a practical substitute for the long-sought “miracle” grass needed for restoring low-pro ducing, drought-stricken ranges. Stock farmers not only need drought-resistant pastures but also must have grasses capable of setting good seed, producing abundant leaves, and establishing themselves quickly. A. H. Walker, State County Agent Leader and for mer Extension Range Specialist, says that the improved native varieties probably will lend themselves to more economical seeding and land preparation than grasses introduced in the past. Forty different varieties of 15 grasses are be ing tested in 68 plantings throughout Texas. Included are old reliables, such as the grama grasses, cane bluestem, green sprangle-top, little and big bluestem, switch grass, and plains bristle grass. Protect Livestock from Lightning Lightning is a constant threat to animals standing under trees or along wire fences, according to W. C. Krueger, Extension Engineer at Rutgers University, New Brunswick, New Jersey. He says that losses can be pre vented by taking the following precautionary measures. ♦ In order to make trees safe from light ning, extend a well-grounded lightning rod up the main trunk to the topmost leaves of each tree. ♦ Protect livestock standing near fences during lightning storms by placing a heavy wire alongside every third or fourth post to a depth of 3 or 4 feet into the ground and then staple the wire firmly across the intersect ing line wires. The ground wire should extend slightly above the top of the post. Improved Native Grasses Promising Greatly improved native grasses developed by the Texas Agricultural Experiment Station are being tested throughout the State. Seeding The FA R M A N D R A N C H BULLETIN Is prepared in the Research Department under the direction of J . Z. Rowe, Agricultural Economist.
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