Large supermarkets, etc, can get access to these ridiculous prices and so it can cause prices to stay fairly low. However, it is not really healthy for the farmers. If you live in a really rural area that doesn't have access to a large world-wide market, the local food will be a lot cheaper because the only outside food you have access to is super expensive.
For me, buying local is about agricultural sustainability. It's about making sure that my neighbours can grow food, sell it and live comfortably. I'd also rather have many small farmers producing the best quality produce they can, than 1 super farmer that is trying to produce the cheapest produce they can. This all adds up to higher prices, of course.
I often feel that we should have "fair trade" in food everywhere. I can buy a pound of raisons from California for less than $2. The same grapes would be 4 pounds. $2000 of raisons at a retail price is 4000 pounds of grapes... And you think for those tonnes of grapes... how much is the farmer getting? It gets a bit crazy.