Economic and Marketing INFORMATION
FOR
INDIANA
FARMERS
Prepared by Members of the Agricultural Staff of Purdue University, Lafayette, Indiana, December 27, 1955
farmer's Share declining! Why?
by
R. L. KOHLS, Agricultural Economics
CURRENTLY the farmer's share
of the consumers dollar spent
jor food is 40 cents. This compares
with a 42-cent share a year ago, a
49-cent share received during the
post-war years of 1947-49, and is
exactly equal to the share received
in the pre-war 1935-39 period.
The farmer's share reached a record level of 54 cents in 1945. Except for a slight increase in the
years of the Korean war, the share
has steadily declined since that time.
The recent decline draws particular
attention and concern, since it has
taken place when consumer incomes
and consumer expenditures for food
have moved to new record highs.
Figure 1 shows the total retail
cost of farm food products, the value
Figure 1. Breakdown of the Total
Retail Cost of Farm Food Products Purchased by U.S. Civilian
Consumers.*
1947-49        1954
EST.'55
Notice that today's consumers
Jave increased their outlays for
f°od more than 8 billion dollars
sincere 1947-49 period.
urce-Marketing   and   Transportation   Situation,
U5DA,   October,    1955.
of these products to farmers and the
charges taken to convert the farm
raw materials into food and get it
into the hands of consumers.
It can be seen that consumers have
increased their outlays for food more
than 8 billion dollars since the 1947-
49 period. However, the costs of
processing and marketing this food
have offset this increase, and the payments to farmers are at the same
levels as during the 1947-49 period.
Since the volume of farm production has increased, the result has
been lower prices to farmers.
What has caused this whopping
44 percent increase in the cost of
marketing and processing farm food
products? Three major changes are
involved:
1. The cost per unit handled has
increased.
2. The volume handled has increased.
3. More services and processing
are being performed.
Rising Costs and Volumes
Figure 2 shows the increases which
have occurred in some of the important cost items. Labor charges account for approximately 40 percent
of the total cost of marketing and
processing. Hourly wages of people
working in this field have increased
43 percent since 1947-49. Freight
rates have increased 24 percent—
and transportation costs account for
nearly 12 percent of the total marketing bill. The costs of other materials used by processors and handlers have also increased substantiallv.
Figure 2. Increases in Specific Marketing Cost Items and Volume,
1955 Compared with 1947-49.*
PERCENT   INCREASE
FROM   1947-49
43
40
30
20
10
24
25
HOURLY     RAILROAD    PRICE OF     VOLUME
EARNINGS FREIGHT     MISCELL. MARKETED
OF  LABOR      RATES      MATERIALS
Hourly wages of labor have
risen 43 percent since 1947-49. Labor charges accounted for about
40 percent of the total marketing
and processing bill.
'Source—Same  as  in   Figure   1.
To this must be added the 18 percent
increase in the total volume of goods
being handled by the marketing machinery.
If it had not been for some increases in efficiency in the use of
labor, the marketing bill would probably be substantially higher and the
returns to farmers lower. Though
wage rates were up over 40 percent,
the labor cost per unit of food
handled has increased only about 25
percent. Part of this increase in labor
efficiencv   has   come   about   because