Cost-cutting lode about mined out for farmers

A restaurant I frequented 30 years ago had pies that were legendary: chocolate and coconut mostly, but on some days banana crème or strawberry. They were food magazine gorgeous, with crispy, flaky crusts, to-die-for fillings, and meringue piled high, sugar beads glistening on top. People came from far and near for those pies, and you were wise to order pie with your meal, else there might be none left.

A slice of that wonderful pie was 45 cents.

Then came the Arab oil embargo, long lines at gas stations, and an inflationary spiral in many commodities, including sugar, which rose more than 1,000 percent above preceding years. The restaurant reluctantly raised the price of its pie to 55 cents.

Months later, as often happens with commodity booms, the bottom fell out of the sugar market and prices for the white stuff nosedived. But though the world was awash in sugar, the price of the pie never went back down; it just went steadily up.

Something of a replay, on a larger scale, is going on now as companies again confront higher costs for energy and raw materials (including sugar). Two industry giants, Kraft and Hershey's, recently announced price increases of 1 percent to 4 percent to cover increased costs of the petroleum-based plastic/polyethylene packaging materials used for many of their popular snack food products.

Aside from that, prices of food and products all across the consumer spectrum have been rising because of significantly higher costs for transportation, raw materials, packaging, you-name-it.

As was the case with the long-ago pie, price increases tend to become factored into the overall cost of doing business, and don't come back down.

The difference, of course, is that manufacturers can adjust the price of their goods to compensate for the higher costs of doing business, but farmers can't.

In the bloodletting of the late 1970s/early 1980s, when agriculture went through “restructuring” and farms were going out of business right and left, the mantra at every ag meeting, in every publication, was, “You've got to find ways to cut production costs and increase yields.”

The farmers who've survived have done just that, adopting reduced tillage methods, finding ways to more effectively use inputs and employ economies of scale, utilizing irrigation and precision ag technology, and en masse moving to biotech crops.

But like the mythical bird that flew in ever-diminishing concentric circles until it collided with its own rear end, the farmers who've managed to stay in business have about mined the cost-cutting lode for all it's worth.

With the uncertainty of farm programs and the vicissitudes of globalization — plus unrelenting increases for inputs and difficulties in obtaining financing — many growers have already quit and others are seriously considering that option.

While the administration continues to tout a healthy economy and minimal inflation, a recent survey of corporate chief financial officers was less rosy, with 81.5 percent expecting inflation to rise. Further, their optimism about business prospects was at a record low, with only 32.1 percent indicating they were more optimistic than a year ago, when 54.2 percent said they were more optimistic.

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