May 2017
Ag Insight

Ag Insight

Retail food prices declined in 2016


Retail food prices decreased by 1.3 percent last year, the first time since 1967 that grocery store (food-at-home) prices were lower than those the year before.

Over the last 50 years, food-at-home prices have, on average, risen 4 percent annually. However, year-to-year price changes have varied during that period. High food price inflation in the 1970s – increases as large as 16.4 and 14.9 percent in 1973 and 1974 – was precipitated by food commodity and energy price shocks.

In contrast, increases were minimal in 2009 and 2010, as the 2007-09 recession put downward pressure on prices for many goods, including food.

U.S. Department of Agriculture’s Economic Research Service attributes the unusual decline in retail food prices in 2016 to a combination of factors. Declining prices for retail meats, eggs and dairy are largely a story about rising commodity production. Lower transportation costs due to low oil prices and the strength of the U.S. dollar also placed downward pressure on food prices in the first half of last year.


India is world’s largest milk producer

India is the largest milk-producing country in the world and leads the United States, the world’s second largest, by a substantial margin.

In 2016, India’s total production reached 154 billion tons compared to 96 billion produced in the United States.

India is unique among the major milk producers because over half its production comes from water buffalo, rather than cattle. Its dairy herd, also the largest in the world, has the biggest herds of both dairy cattle and water buffalo.

Since 1980, India’s milk output has grown consistently at an average of 4.5 percent per year. The rate of growth between water buffalo and cow’s milk has also been quite similar at 4.6 and 4.5 percent, respectively.

India surpassed the United States as the largest dairy producer in 1997, when both countries produced roughly 70 billion tons, each.



 Income sources affected by farm size

In 2015, farm households had a median total income of $76,735 per household, a third greater than that of all U.S. households ($56,516).

Median total household income increased with farm size, with the median income of households operating small family farms approximating the U.S. median household and those operating larger family farms far exceeding it.

The source of household income also varied with farm size. As farm size decreased, off-farm income represented a larger share of total household income. Households operating midsize and large farms (gross cash farm income, or GCFI, greater than $350,000) earned the majority of their total household income from their farm operations.

By comparison, over half of households operating small farms (GCFI less than $350,000) incurred small losses from farming, so the majority of their total household income came from off-farm sources.

Wages from off-farm jobs accounted for over half of off-farm income across all farm households. Farm households also receive significant income from transfers (such as Social Security or private pensions), interest and dividends, and non-farm business income.


Bone-in chicken exports to South Africa resume

After a 15-year absence, the United States resumed exports of bone-in chicken to South Africa in 2016 and quickly gained an 11-percent share of that market.

Until 2001, the United States was the largest supplier of bone-in chicken to the South African market. But that year saw South Africa impose antidumping duties on U.S. chicken leg quarters, after which U.S. exports dropped nearly to zero.

In 2015, under pressure from the U.S. poultry industry, Congress threatened to exclude South Africa from the upcoming renewal of the African Growth and Opportunity Act, unless the country provided greater market access to U.S. poultry. South Africa agreed in June 2015 to allow a quota of 65,000 metric tons of U.S. bone-in chicken at the most favored nation tariff rate of 37 percent.

The first U.S. chicken entered the South African market in March 2016 and total U.S. exports of bone-in chicken to that nation during the year reached 21,291 metric tons.

The U.S. share came at the expense of Brazil and Argentina, both of which saw a drop in their exports to South Africa.

The largest supplier was the European Union that maintained its 74-percent share of South African imports of bone-in chicken.



Fruits, veggies top organic food sales

Although organic food sales account for a small share of total U.S. food sales, they have exhibited double-digit growth during most years since 2000, when USDA set national organic standards.

In 2015, the Nutrition Business Journal estimated U.S. organic retail sales at $37.1 billion, or about 5 percent of total U.S. at-home food expenditures, over double the share in 2005.

Organic sales in all food categories have grown over the last decade, but fresh fruits and vegetables remained the top selling organic category in 2015, accounting for 40 percent of total organic sales. Dairy, the second top-selling organic category, accounted for 15 percent of total sales.


Farm share of food dollar declines

U.S. farmers received an average of 15.6 cents for farm commodity sales from each dollar spent on domestically produced food in 2015, down from 17.2 cents in 2014.

Known as the farm share, this amount is at its lowest level since 2006, and coincides with a steep drop in 2015 average prices received by U.S. farmers as measured by the producer price index for farm products.

USDA’s ERS uses input-output analysis to calculate the farm and marketing shares from a typical food dollar, including food purchased at grocery stores and at restaurants, coffee shops and other eating-out places. 2015 was the fourth consecutive year that the farm share has declined, but the 2015 decline was substantially more than in the three previous years.

The drop in farm share also coincides with four consecutive years of increases in the share of food dollars paying for services provided by the foodservice industry. Since farmers receive a smaller share from eating-out dollars due to the added costs for preparing and serving meals, more spending on food away from home will also drive down the farm share.


Strong demand for soybean oil, meal projected

The recently released USDA agricultural baseline projects strong demand for soybean meal and oil over the next decade.

These gains reflect low expected feed prices, increasing livestock production and steady demand by foreign importers. Strong global demand for soybeans – particularly in China – boosts U.S. soybean trade over the projection period.

While soybean exports are projected to rise, competition from South America – primarily Brazil – will lead to a reduced U.S. share of global soybean trade. U.S. soybean meal use is projected to increase about 1 percent per year over the baseline period.

Domestic soybean meal consumption that accounts for roughly 75 percent of total disappearance is projected to increase at just over 1 percent per year. U.S. soybean oil use is also projected to rise about 1 percent per year over the projection period.

Soybean oil exports are projected to rise only modestly due to increased competition.


Former ag secretary Clayton Yeutter dies

Former U.S. Secretary of Agriculture Clayton Yeutter, 86, died at home in Potomac, Maryland, March 4, 2017, after a four-year battle with metastatic colon cancer.

Yeutter, who was born and raised in Nebraska, held a number of high-level positions in both the public and private sectors during his career and was known as someone well-respected by both friends and political foes.

He served as U.S. trade representative under President Reagan and then as Secretary of Agriculture under President George H.W. Bush. In 1991, he was named Chairman of the Republican National Committee before finishing his tenure in government as counselor to the president, a cabinet-level White House post, also under Bush.