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The price of wheat in the US is currently ~$170 per tonne. Retail price of flour in the US is currently a bit over $1100 per tonne. Fertiliser and pesticide co

The price of wheat in the US is currently ~$170 per tonne. Retail price of flour in the US is currently a bit over $1100 per tonne. Fertiliser and pesticide cost seems to be about 23% percent of revenue, which would work out to about $40. So fertiliser and pesticide cost is currently about 3.6% of the final retail price. Figures come from random google searches, but I think they are about right. There are a few things you have to understand about these figures. The first is that only 15% of the retail price is the price of wheat. The rest is shipping, processing, packaging, waste, advertising, and profit. You can actually work out how much each bit actually adds to the price by looking at the price at each step. For example, if you look at wholesale wheat flour prices, you are looking at about $3-400 per tonne. The reality is that distribution is the vast majority of the cost and each entity that touches the product along the way wants a big markup. Money costs and each party wants a return on investment, not a fixed return. So, if we replaced fertiliser and pesticide with something that costs $400 instead of $40 per tonne of wheat, then the price of the wheat will go to $530. Ideally that will result in a retail price of ~$1500 (about a 25% increase), but in reality it's likely to be at least double. Personally, I think this is worthwhile -- especially if the extra $360 per tonne would allow smaller farms and provide more jobs in the farming industry. I don't think it is realistic for 2 main reasons. First I have no idea if even $360 would be enough. Second, large corporations and rich people have a very vested interest in continuing the current trend of moving all of the price into distribution. These distribution channels can be controlled relatively easily and provide rent for them. It also keeps the world food price below the level that traditional farming can support. This means that rich countries can dismantle the agriculture industry of poor countries and then control them. I encourage anybody interested in this kind of thing to look at the conditions attached to government loans/subsidies to poor countries that are used to buy food. When you start looking at this stuff, you are playing with big players who have lots to gain/lose and who aren't going to give up anything easily.

randomdata 9y ago
> especially if the extra $360 per tonne would allow smaller farms I would expect the opposite. Wheat was worth a record-high ~$380/tonne back in 2008 and what happened was that the biggest farmers went spend-crazy on land, preventing the existing small farms from growing, and completely pushing thoughts of any new farm operations right out the window. We're still suffering the effects of that as price of land has yet to come down with the price of the crop. > and provide more jobs in the farming industry. I'm not sure that lack of jobs are really an issue in the farming industry, to be honest. There is already said to be a farm labour shortage as-is. I farm in Canada, so those are the numbers I'm most familiar with, but the news reports that there are 60,000 vacant farm jobs available. Other reports indicate that farm jobs have one of the fastest growing wages in the country (which I realize technically invalidates there being a shortage, but labour shortage has come to mean something other than shortage). A big reason why agriculture has been pushing the boundaries of automation is a result of how hard it is to find labour. Especially skilled labour.
- dmurray 9y ago
  > Other reports indicate that farm jobs have one of the fastest growing wages in the country (which I realize technically invalidates there being a shortage, but labour shortage has come to mean something other than shortage). Isn't that the exact definition of shortage? Prices rise because demand excess supply at the previous price.
  - randomdata 9y ago
    A shortage is technically defined as a situation where price cannot rise, such as the government imposing a price ceiling, preventing the price from reaching equilibrium. As long as price is able to rise, demand will wane with the rising price, and thus the supply will ultimately meet the needs of the demand. That price is rising should invalidate the idea of a shortage, but labour shortage seems to have come to mean a situation where an employer has made their desire to hire known, but received no suitable applicants.
    - shkkmo 9y ago
      Isn't a shortage technically defined as when supply can't meet demand? Capped prices is one potential cause, but demand also isn't always very elastic and this can cause shortages on it's own.
      - randomdata 9y ago
        > Isn't a shortage technically defined as when supply can't meet demand? It is, yes, and ultimately says the same thing. I prefer the alternative phrasing as I think it more clearly explains the mechanisms, especially when people sometimes confuse demand to mean 'I want something'. > Capped prices is one potential cause, but demand also isn't always very elastic and this can cause shortages on it's own. I don't see it being contradictory. In an ideal model of inelastic demand, the demand never wanes no matter how high the price goes. However, price cannot continue to rise infinitely, so you have technically created a situation where price cannot rise again. It is still the price not being able to rise that characterizes the shortage in this case. I did not mean to suggest that the government is the only thing that can cause prices to stop increasing. It was just one example.
fpoling 9y ago
There was a study in Denmark that showed 25% of the income from sales in supermarkets went into advertising. It is interesting that the distribution, not production, dominated the prices since ancient times. 2500 yeas ago in Mediterranean transporting wheat 100 km over land doubled its price compared with price at a sea port which was already quite higher than production. In a bad year when local crop failed rich citizens prevented widespread hunger by buying enough extra bread overseas.
honestoHeminway 9y ago
.. each entity that touches the product along the way wants a big markup... Oh, yes. I know a miller, where my brother did a intern ship- buy dry wheat, spray it with water till it gets too just the max allowed water percentage - resell it. So lets add 5 % scaming to the whole game.

randomdata 9y ago

> especially if the extra $360 per tonne would allow smaller farms I would expect the opposite. Wheat was worth a record-high ~$380/tonne back in 2008 and what happened was that the biggest farmers went spend-crazy on land, preventing the existing small farms from growing, and completely pushing thoughts of any new farm operations right out the window. We're still suffering the effects of that as price of land has yet to come down with the price of the crop. > and provide more jobs in the farming industry. I'm not sure that lack of jobs are really an issue in the farming industry, to be honest. There is already said to be a farm labour shortage as-is. I farm in Canada, so those are the numbers I'm most familiar with, but the news reports that there are 60,000 vacant farm jobs available. Other reports indicate that farm jobs have one of the fastest growing wages in the country (which I realize technically invalidates there being a shortage, but labour shortage has come to mean something other than shortage). A big reason why agriculture has been pushing the boundaries of automation is a result of how hard it is to find labour. Especially skilled labour.

dmurray 9y ago
> Other reports indicate that farm jobs have one of the fastest growing wages in the country (which I realize technically invalidates there being a shortage, but labour shortage has come to mean something other than shortage). Isn't that the exact definition of shortage? Prices rise because demand excess supply at the previous price.
- randomdata 9y ago
  A shortage is technically defined as a situation where price cannot rise, such as the government imposing a price ceiling, preventing the price from reaching equilibrium. As long as price is able to rise, demand will wane with the rising price, and thus the supply will ultimately meet the needs of the demand. That price is rising should invalidate the idea of a shortage, but labour shortage seems to have come to mean a situation where an employer has made their desire to hire known, but received no suitable applicants.
  - shkkmo 9y ago
    Isn't a shortage technically defined as when supply can't meet demand? Capped prices is one potential cause, but demand also isn't always very elastic and this can cause shortages on it's own.
    - randomdata 9y ago
      > Isn't a shortage technically defined as when supply can't meet demand? It is, yes, and ultimately says the same thing. I prefer the alternative phrasing as I think it more clearly explains the mechanisms, especially when people sometimes confuse demand to mean 'I want something'. > Capped prices is one potential cause, but demand also isn't always very elastic and this can cause shortages on it's own. I don't see it being contradictory. In an ideal model of inelastic demand, the demand never wanes no matter how high the price goes. However, price cannot continue to rise infinitely, so you have technically created a situation where price cannot rise again. It is still the price not being able to rise that characterizes the shortage in this case. I did not mean to suggest that the government is the only thing that can cause prices to stop increasing. It was just one example.

fpoling 9y ago

There was a study in Denmark that showed 25% of the income from sales in supermarkets went into advertising. It is interesting that the distribution, not production, dominated the prices since ancient times. 2500 yeas ago in Mediterranean transporting wheat 100 km over land doubled its price compared with price at a sea port which was already quite higher than production. In a bad year when local crop failed rich citizens prevented widespread hunger by buying enough extra bread overseas.

honestoHeminway 9y ago

.. each entity that touches the product along the way wants a big markup... Oh, yes. I know a miller, where my brother did a intern ship- buy dry wheat, spray it with water till it gets too just the max allowed water percentage - resell it. So lets add 5 % scaming to the whole game.