Food for thought

When corn is $4 a bushel there is 5.6 cents worth of corn in a 18oz box of corn flakes. When corn goes up to $6 a bushel there is 8.6 cents worth of corn in that box.

A liter of soda pop has 3.3 cents worth of corn at $4 a bushel. 5 cents when corn gets to $6 a bushel.

It takes 12.6 cents worth of corn to produce a gallon of milk when corn is $4 per bushel. 19.3 cents at $6 per bushel.

Cost to produce one pound of meat goes up about 10 cents for beef 13 cents for pork and 10 cents for chicken when corn goes up from $4 per bushel to $6.

I guess my point is when corn goes up to $6 it does not greatly affect the cost of food.

Costs to produce a box of corn flakes goes up 3 cents a box and the processors raise the box by a quarter.

Just keep this in mind when grain prices get up to where they have been lately.

Gary

Thanks for the reminder Gary, and for you doing your part to inform. Maybe now would be a good time for me to remind the folks in charge of our corn/soybean checkoff boards that they also need to keep this information before the eyes of the consuming public.

Do you know who gets the majority of the price gouging dollars? Just wondering if it is the processor or retailer.

I think there are many steps in between the farm and the consumer where everyone is getting their share. Possibly too many steps. Each company that handles it has a few corporate big wigs making no less than 6 figures (all 9s i'm sure) plus larger bonuses, etc. They "have" to pay that payroll money some how. Then there is all the trading. People that don't know corn from marbles in an office or at home on the computer getting their hands into it too.

In small scale retail/parts, we're supposed to aim for 30% gross profit to the end consumer to stay afloat/grow (varies on product and customer type, but is supposed to average out). The more middlemen, the more 10-40% markup on wholesale cost at each level of purchasing.

We are pretty blessed in the USA to have cheaper and more abundant food supplies than many other places, yet we still have citizens here that legitimately cannot afford to eat properly, even those with a full time job--only costs they could cut are transportation to work(tax license payments fuel) and medical insurance; impossible cuts. not much more to say without getting into politics though.

karl f

karl f,

Thanks for the well thought-out, well stated post. I agree with you all the way, but I am curious about one aspect. The point of the original post was that raw material cost of most finished products is a small part of the per item final cost.

It seems to me that too much emphasis is placed today on executive salaries. I wonder what percentage of cost of most finished goods is actually represented by executive pay. General Foods, Ford, IBM, etc. are huge companies with a vastly diverse array of costs going into their final products. It doesn't seem to me that executive compensation packages would actually represent a significant part of the final costs of their individual unit production.

It seems to me that there is much too much class envy in our society at this time.

But maybe I'm just not recognizing the impact of executive compensation.

Tom in TN

Then you get lying hypocrite b@stards like Beck who say they don't care if they have to pay $10 for a head of lettuce as long as it keeps those brown skins out of the country,but when the price of a box of corn flakes goes up 3 cents,WE'VE GOT TO STOP WASTING CORN TO MAKE EVIL ETHANOL!

I'll kinda second the post about the executive's salaries.

I'll quickly say I think they make too much (as well as most everyone says.. probably because we're jealous.. but hey..) But I can say, at my job my boss makes more money than I do.. and you know what? GOOD.. I don't have to deal with all the BS he does, and if I had to, you'd have to pay me more, of course, I'm not much of a people person, he is.

Now, the exec's salaries.. ok, so they make a million, give or take.. Since the original example was corn flakes (a Kellogg's product) how many boxes of product do they sell in a average year? They must have a dozen different brands of cereal, as well as all the other things (pop tarts come to mind.. A quick google search shows over 50 BRAND NAMES)..

At a million dollar salary:
100,000,000 boxes of product at 1 cent per box pays his salary..

I can't seem to find anything that shows how many "boxes" were sold, but based on a quarterly earning release (although a couple years old) they announced 332 million dollars in sales for a given quarter. Now I know that can vary from quarter to quarter.. but.. based on $4.25 a box average (some items cheaper, some more expensive I'm sure..) it comes to 78,117,647 boxes that quarter, or if it equaled out all year, it would come out to about 312,470,588 boxes..

I know my mathematics really prove nothing, as they're not really based on much fact, but the point I was trying to prove was that per box, his salary really makes no difference to the everyday consumer.. BUT I STILL AGREE THAT HE MAKES TOO MUCH!!!!

Brad

Your post about executive salaries reminded me of Micheal Jordan during the 1990's. Nike paid him $27 million in one year to endorse Nike shoes while the entire Chinese labor force MAKING the shoes weren't paid that much altogether. Seems like he could have endorsed them for half as much and doubled their poor pay. Seems to be all about greed. I'm told Micheal Jordan still gets Nike royalties even though he's retired for years.

That is a very informative thread and completely factual. When I worked for Kraft/Post over 10 years ago it was broken down like this for a, at that time, $2.50 box of Post Toasties. Raw materials: 10 cents, packaging:25 cents, Labor: 15 cents, government regulations: 80 cents and equipment and building maintenance, insurance and depreciation was the rest.

One thing I will add is that 10 cents don't sound like much to add to the price of a pound of beef but it can mean the difference between profit and bankruptcy in an all livestock operation. We can't pass that cost on to the consumer any more than a grain farmer can pass fuel costs. And the FSA office won't even talk to us.

gary, what was your source for the corn to milk conversion?
regardless, going from $4 to $6 is a 50% increase in the single largest-cost item in milk production. it would sure be nice to get a corresponding increase in our price for milk.

It's not that well thought out, you asked some questions about it and a few others said some more about it.

I'll admit i have some jealousy about those making more money than me, it clouds the judgement a little. (although rewarded for good work is ok by me, but getting a bonus for ruining a company is not)

I should have said that with too many companies involved in the supply chain to make one product, each ones' need to make payroll and overhead in general increases the cost to the end user.

Also thinking about it all day, I realized a lot of cost to the end user is spent on advertising, development, and overhead--those machines that automate food making aren't cheap, as simple as some look, and they aren't as common as a ford car, so that manufacturer can charge what they want to the production facility because they know they can (and probably deserve most of the price).
Unfortunately, some cost has to goto supporting a corporations failing ventures. etc. etc.

I still can't comprehend 100-200k for a tractor despite what I said a couple sentences ago.

Suppose I covered what was already said, but got on a roll.

Hard to figure how a couple pennies here and there can change the retail cost so much, isn't it?

karl f

I don't know. If he was able to get the box manufactured for a 1/2 cent less did he earn his money? I'm jus say'in...

7.00 dollar corn 4.00 gas country broke tried it in 2008 will happen again good luck

If you add the extra cost of corn to your food bill it should not cost you over a $1.00 a day to your food bill.

Gas may be the problem but that $4 gas is NOT caused by high corn prices.

Maybe we could cut our internet service, cable tv or our cell phone if we want to eat. Those three right there cost us over $5 a day. I don"t text message but 4 or 5 texts cost some people more than a dollar a day.

Just my thoughts.

Gary

Corn? PBS aired a piece about corn production in Nebraska last Saturday (two days ago) on their 'all things considered ' program. You can read or hear it at their web site. I strongly disagree about genetically engineered corn in our food chain but the program is well worth your attention.