Farmers and Grocery Chains Suffer as Prices Continue to Slide

Most people are celebrating the price reductions at the grocery store, but farmers and grocers are suffering for lower consumer costs. The deflation of corn, dairy, and meat is hurting farmers and grocers nationwide, while consumers are enjoying the slump at the super market. The deflation is the result of a surplus of many crops due to a higher yield from the weather conditions and a decrease in demand from China. Also factored in is the reduction of oil prices; let’s not forget ethanol is made from corn!
Farmers have to depend on crops, which can vary greatly from one year to the next and this often creates a surplus or need for specific items. In the past year we have experienced a shortage of eggs and chicken due to avian flu, which caused a shortage and prices rose. Now that the avian flu epidemic is over, prices have dropped drastically.
While consumers have seen their prices drop 1 .6 percent over last year, farmers have taken a much harder hit in their incomes due to the reduction of prices for the items they produce. For example: Corn has dropped over 60 percent from $7.80 per bushel to $3.11, wheat is down over 56 percent from a high of $12 per bushel to $5.18, and soy is down over 46 percent.
There has also been an excess of millions of pounds of milk, adding to farmers’ woes. The U.S. government has agreed to buy $20 million of surplus cheese that can’t be sold and would negatively impact the economy if farmers had to take the loss. Grocers and farmers will not able to continue functioning with the currently very low prices.
Most grocery stores are reporting losses due to deflation, a far cry from when inflation was a major problem in the industry during the recession. Walmart, however, has stated that they are experiencing a sales boom due to the price drops, which helps to free up customers’ cash so they can spend their extra money on other items at the retail giant. California’s drought is also creating higher prices in the fruit industry. There is no end in sight for the California drought, so this trend will continue for some time.