US Federal Reserve releases report saying labor, energy are 42 percent cost of food, farm inputs 19 percent, as “blame battle” rages over food prices

The Federal Reserve Bank of Kansas City released a report saying that the marketing cost has increased from 59 percent of food cost in 1959 to 80 percent today, due to labor and energy costs. The Fed said that labor and energy now make up 42 percent of the cost of food, while farm value is 19 percent.

In commenting on the report, Ron Litterer, president of the National Corn Growers Association (NCGA) told the Grand Island Independent that the “USDA reports that farmers receive 19 cents from every dollar spent on a bag of wheat flour, but only 5 cents from a dollar spent on a loaf of bread and just 4 cents from a dollar spent on a box of corn flakes”.

The NewsHour, a PBS nightly news program, recently linked the rising cost of cornflakes to ethanol demand on its website. “How is the price of gas connected to the cost of breakfast? Increased demand for ethanol, the fuel being touted as an Earth-friendly solution to the nation’s looming energy needs, is raising the cost of cornflakes,” the article by Christina Satkowski stated.

Meanwhile, the American Meat Institute produced a report saying that ethanol would add $100 billion to food costs between 2005 and 2010. The report stated that costs to the broiler industry rose $3.4 billion due to increased corn prices. In related news, a currency analyst said that the rising price of oil, or $25 of the increase, was sparked by the falling value of the US dollar due to efforts by the US Federal Reserve to address the liquidity in credit markets following the sub-prime mortgage meltdown.

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