Following other commodities’ costs, agricultural prices have dropped sharply during the past few months. The price of wheat declined by over fifty percent since its annual high, while the price of corn was slashed by half, reaching its lower level since early 2006. On the other hand, costs of production input, which had also gone up, did not experience a significant decline. Consequently, facing shrinking revenues, farmers organized for action in several countries to alert authorities and public opinion to their struggle. The media, however, still consider that, because of the major price increases of 2007/2008, this price turnaround will not impact agriculture’s financial health.
Highlighting that farmers are worried about “paying the bill twice”, Jean-Michel Lemétayer, President of FNSEA (the French National Federation of Farmers’ Unions), condemns the prevalent simplistic vision of agriculture, which suggests that when prices of commodities rise, farmers’ income is supposed to increase accordingly and, conversely, that a decline in prices generates a drop in farmers’ revenue.
Besides the fact that this approach is fallacious––operating expenses are not taken into account––it overlooks key factors in the food value chain linking farmers to end consumers: middlemen as well as front margins and yearly listing fees. It is therefore crucial that the media and international decision makers recognize that a price indicator is not adequate to understand how farmers’ income develops and that one must not confuse income and sales. |