Casaubon's Book

How Expensive is Food, Really?

This is a lightly revised and updated version of a piece that ran at ye olde blogge and at Grist, but it seems just as pertinent now as it did in 2007 when I wrote it. At the time, some people doubted that the boom we were seeing in biofuel production, which was pushing up grain prices, would be followed by any kind of a bust. Farmers were predicting many, many good years – but we all know what happened. Farm incomes dropped by more than 20% during the recession. Just another reminder that busts are part of the boom and bust cycle, no matter how little we like to admit it.

There is no doubt whatsoever that rising food costs are hurting people all over the world. More than half of the world’s population spends 50% of their income or more on food, and the massive rise in staple prices threatens to increase famine rates drastically. Many people have already pointed out the intersections between the changes going on across North Africa and the Middle East and the current food crisis, and with all of us having spent more time in food crisis than out of it in the last three years, that seems to be an emerging norm.

It is also undoubtably true that rising food prices are digging into the budgets of average people. For the 40+ million Americans who are food insecure (that is, they may or may not go hungry in any given month, but they aren’t sure there’s going to be food) are increasingly stretched. Supportive resources like food pantries are increasingly tapped, and the value of donations goes down as it costs more and more to feed a family. Everyone is finding that food and energy inflation are cutting into their budget substantially. During the last wave of food and energy price increases, rises in food and energy prices alone have eroded real wages by 1.2 percent. The USDA has suggetsed that overall food prices will probably rise by another 3-4% this year, but that did not take into account weather constraints in Mexico, Florida and other areas where winter produce is grown.

The food crisis is manifestly just that – a crisis. At the same time, there’s another side to this coin. Rising food prices are to some extent good for farmers. Certainly, large grain farmers in the US, Canada and many other rich world nations have been experiencing a well deserved stabilization, after a radical drop in farm income during 2008-2009. And there are plenty of people, me included, who have been arguing for years that we don’t pay enough of the true costs of our food. So who is right? How do you balance the merits and demerits of food prices?

One way would be think historically, because in purely historic terms, it is entirely normal to spend a lot of your income on food. Consider this 2008 piece from Jim Webster in The Farmer’s Guardian:

“It probably took 150 years for our civilisation to swing from a man’s annual wage being the yield of one acre, to that same acre paying him for a week. I wonder how long it will take to swing back?

Obviously we can try and push for increased yields, but to match the scale of increase we have seen since they huddled in gloomy bars and decided the Egyptians were liars if they said they got over 400kg an acre, we would have to hit 20 tons an acre. GM is not going to deliver that.

So personally I don’t think that wheat is dear, I don’t think it is dear at all.”

High food prices are obviously a matter of perspective. By long term historical analysis of agrarian socities, food prices are undoubtably low, despite their current rise. But when we talk about low food prices we tend to be implying that we could and should spend more money on food. That is undoubtably true of middle class and above rich world denizens (who constitute a tiny percentage of the world’s whole population). Many of these people already voluntarily spend more on food than most people, for pleasure or as participants in food movements of various sorts – specific diets, high culture food preferences, or environmental reasons.

Can most of the world endure higher food prices, though? And are all high food prices created equal? We already know that poor urbanites and small scale subsistence farmers who buy some of their food are most likely to be badly hurt by rising prices. But what about everyone else? And are rising food prices the best way to create agricultural justice?

As Helena Norberg-Hodge, Todd Merrifield and Steven Gorelick argue in _Bringing the Food Economy Home_, the supposed low price of food masks several other truths. The first is that percentage of household income spent on food comparison is based, to a large degree, on concealed costs.

The first is the reality of the two worker household. When we compare the decline in percentage of US income spent on food between 1949 and 1997, a decline from 22% to 11%, the difference seems stark indeed. But in that same, the single earner household went from being a norm to an anomaly – that is, it now took two people to support the family in many more households. So yes, the percentage has dropped, but that represents in most cases, the percentage of two people’s working wages.

But more importantly, as Norberg-Hodge et al point out, as the percentage of income spent on food fell, the percentage spent on housing skyrocketed. And these two things are entirely related. As the authors write,

“This is a direct consequence of the same economic policy choices that supposedly lowered the cost of food. Those policies have promoted urbanization by sucking jobs out of rural areas and centralizing them in a relative handful of cities and suburbs. In those regions, the price of land skyrockets, taking the cost of homes and rentals with it.

Thus, the proportion of income spent on food today may be less, but since total income needed is so much higher, people pay much more for food now than the statistics would lead us to believe.” (Norberg-Hodge et al, 73)”

I think this point is especially important, because it means we cannot view food prices in isolation from the society as a whole.

The reality is that industrialization creates not just costs, but real dependencies. It isn’t just the high price of concentrated housing (housing whose value is now utterly divorced from the productive value of the land itself), but also upon a host of other things – urbanization means increased dependencies on energy, because large populations in close proximity can’t meet their own heating and cooling needs with locally sourced solutions, and infrastructure must be created to handle outputs. As areas become more tightly populated and work is centralized, transport to those regions (agrarians may need to transport to sell and shop, but they often don’t need to “go to work” in the sense of daily transport dependencies) starts creeping up in cost, whether public or private.

The process of industrialization and urbanization then creates the need to compensate for the rise in prices to meet needs that were not previously monetized. One way is to take more labor from either a single breadwinner, or add more breadwinners. Juliet Schor, in her book _The Overworked American_ has documented that 19th century industrialization represented the longest hours ever worked by any people, despite our overwhelming perception that farmwork is unnecessarily hard. The next most overworked people in history are us – we come right after the 19th century factory workers and coal miners, and well before any agrarian society. But the rising costs of meeting basic needs mean that we must work harder than many agrarian people have.

For example, in _1066: The Year of the Conquest_ historian David Howarth notes that the average 11th century British serf worked one day a week to pay for his house, the land that he fed himself off of, his access to his lord’s woodlot for heating fuel, and a host of other provisions, including a barrel of beer for him and his neighbor on each Saints day (and there were a lot of him). How many of us can earn our mortgage payment, our heat, and our beer on a single day’s work?

The long hours required by industrial society also have the further “benefit” of ensuring that it is extremely difficult for those embedded in it to meet their needs outside the money economy. It is difficult (not impossible, just difficult) to feed yourself from a garden when economic policies supporting urbanization create incentives to build on every piece of land, and when one works long hours, or multiple jobs. As we see now, it is difficult even to feed your family a home cooked meal, much less grow one.

But demanding more labor to meet these needs is only one part of the coin of industrializing economic policies – it is also necessary to move people who would prefer to stay there off their land, and to reduce prices for food, so that those now paying much more of their income into housing and energy can afford to eat. As George Kent exhaustively documents in _The Political Economy of Hunger_, the main beneficiaries of the Green Revolution were not, in fact, the world’s poor, the supposed recipients of our help, but the food buying members of the urbanized rich world, who got increasing quantities of cheap meat and food products. This study was backed up by a 1986 World Bank study that concluded that increased food production in itself does not reduce hunger, and that the gains of the Green Revolution went overwhelming to the Global North.

What these increases in product do do, however, is reduce food prices paid to farmers, thus meaning fewer people can make their living successfully in agriculture. It does create surpluses to dump on markets, thus increasing market volatility, and it does create incentives to turn farmland into urban land, and to increase the size of cities and their suburbs.

Moreover, the industrial economy that strips value from food shifts that value, and the health of the economy to other things – thus, the ability of consumers to stop buying plastic goods and entertainment and shift their dollars to food is extremely limited – their jobs often depend on the plastic goods, not the food economy. So we create powerful incentives to keep food prices low.

There’s a tendency to look at the world through progressive lenses, and the story that Jim Webster tells is part of that. It is true that food was far more hard earned in the past than it is now. It is also true that other things that were comparatively low cost in an agrarian society were buried in the cost of food – the cost of land was tied to what it could produce. Thus the cost of land was constrained in ways it cannot be when those ties between land and what it produces are broken.

Thus, when we think about the distinction between what is good for farmers and what is good for the population as a whole, we need to shift our thinking from short term analysis to long term, societal thinking. That is, a short term boom in prices driven by speculation, biofuel production, rising meat consumption and climate instability is undoubtably good for some farmers for a short time, but booms are followed by busts universally – as we have seen. What farmers do not need is a boom and bust cycle that leads them to invest in land and equipment, only to find the value of their crops dropping again.

It is true that farmers benefit from rising per bushel prices for grains – or at least some of them do. Many struggle as land taxes rise, fertilizer costs rise and the price of livestock feed goes up faster than the prices for their products. Dairy and livestock farmers generally suffer. But some benefit. But it is worth noting that this represents no real shift towards enriching farmers – we are still using the same agricultural policies that give farmers the tiniest percentage of the cost of a loaf of bread. To put this in perspective, agricultural writer A.V. Krebs observes that the Philip Morris corporation alone receives 10% of every single dollar spent on food in the US. ConAgra alone gets 6%. All the farmers in the US put together get just over 4%.

It is true that we underpay farmers – but rising food prices do nothing in that regard. In fact, it inserts farmers into another boom and bust cycle. What farmers need are stable food prices, higher than they have been, and to receive a decent portion of the price of the food we grow. And that will only happen if we start cutting out the corporate middle man, and working with farmers – giving them incentives to sell directly to consumers (who have to start eating what farmers actually grow) because they know that the consumers who buy from them will not stop eating when the speculators turn to new things and the ethanol plants close down because their Energy Return is minimal at best.

More importantly, we cannot create a viable agrarian economy without shifting back, on some level, to land and housing prices that are tied to the value of the soil underneath it – that is, having artificially inflated the cost of housing, we must, in the devaluation of housing, shift value back to agriculture. As we lose other jobs, we must concentrate on creating agricultural jobs – and pushing the economy towards efficiencies of land use, not a reduction of human labor. The price of food here is only a small part of the massive retrofitting of our economy required to pay the real price of our agriculture – and receive the real value.

Sharon

Comments

  1. #1 Stephen B.
    February 14, 2011

    Sharon,

    Thanks for this sanity-restoring reminder of just what’s true about food prices and where we need to go in the future.

    Last week, I got my hard copy of Farming Magazine (http://www.farmingmagazine.com/toc.aspx – but the latest print edition isn’t on their web site yet) in the mail and columnist Martin Harris had a completely exasperating piece on how food prices are really very cheap and that if we took 1930s food prices and scaled them according to some inflation indicator he had, bread would be something like $3.50 a pound rather than the $0.95 he claimed bread was in his area. He went on to further say that his $0.95 a pound loaf was “better” because it was fortified with sprayed on vitamins. Never mind the 1930s loaf was probably far more substantial than the air-puffed, white, chemical bread he found for that $0.95 per pound.

    There was no talk of energy or anything else, just food is cheap now, freeing consumers to spend more on housing, etc.

    I ended up yelling at the newsprint.

    His signature line says he’s a former farmer turned architect. I’m not sure how that informs readers as to his perspective and opinions, but there it is.

  2. #2 Greenpa
    February 14, 2011

    “And that will only happen if we start cutting out the corporate middle man, and working with farmers – giving them incentives to sell directly to consumers”

    It does say “corporate” middle man, I know. But it’s worth understanding that many middlemen serve very legitimate and useful purposes.

    A huge barrier for farmers is the simple time it takes to deal with each customer. It gets to be disastrous, once you’re producing real quantities. Then the farmer has to decide; produce more food; or cope with customers? You want to sell more eggs, for example- mightn’t it be useful for you to sell larger quantities to a compiler/distributor?

    We’ve been intimately involved in building the “SE Minnesota Food Network” – basically a co-op kind of thing; local farmers feed their eggs, corn, squash, cabbage, pork – into the Network; which owns a refrigerated truck, and hauls stuff the 120 miles to the Twin Cities; selling to a variety of customers there. http://www.southeastmnfood.com/

    Lots of the farms involved are Amish. Uniformly, they found it was really really hard to sell what they could grow.

    I agree that ConAgra, et all, have morphed into parasitic entities; but we need to not tar the baby with the same bathwater…
    :-)

  3. #3 Sharon Astyk
    February 14, 2011

    Greenpa, absolutely (again, that’s why the word corporate is there, as you note ;-)) – but the percentage of the dollar that goes to middlemen has risen steadily since the 1940s. Middlemen are important in agriculture – I’m happy to share my profits for an established market. I’d just like more than “4% for me, 96% for you ;-))”

    Sharon

  4. #4 ChrisBear
    February 14, 2011

    Very good timing! I think I will be sharing this post with a few people.

    Yes, middlemen in general do serve a purpose, but all things in their proper measure. And these days the middle is looking too fat.

    Stephen,
    I think I am making bread for ~$0.50/Lbs. So I will be glad to sell them to you and you can sell them Mr. Harris :)

    Greenpa,
    I checked your site, great idea! Tried to send an email via the form, but the page kept telling me my email was invalid (needed ‘@’). I typed it 3 times, no luck.

  5. #5 John Phipps
    February 14, 2011

    What an astonishingly ill-informed and patronizing post! As a sixth-generation farmer who has campaigned against biofuels from the get-go, I appreciate that sentiment. But the argument against “boom-and-bust” cycles is sadly misguided.

    There are few thousand of us industrial farmers who capably convert sunshine into what the market indicates it wants. Ups and downs in the market are signals we need to adjust our activity. Stability is almost always synonymous with low prices.

    I don’t presume to arrange the economic affairs of accountants or plumbers. Why should they think they need to arrange mine?

  6. #6 Douglas Watts
    February 14, 2011

    Food is dirt cheap. Just dive into any dumpster behind any big supermarket. They throw away a 1,000 pounds of it every night. But if you try, the cops will arrest you for stealing.

    In the US we throw away 5X more food than we give to ‘poor’ people in food banks.

    So poor and old people go without food. And tons of food goes to landfills.

    Whoopee.

  7. #7 Alan
    February 15, 2011

    Interestingly, the $3.50 quoted above as the supposed cost of a loaf of 1930s bread when inflated from the value of money then, is almost exactly the price of a loaf of some of the best artisanal bread that can be purchased. A small regional baking company here in the Pacific Northwest bakes this bread daily at its 9 locations in Portland and Seattle and sells it through these bakeries, natural food stores and farmers’ markets. I would be surprised if the 1930s bread was as good as this outfit’s bread because the American commercial bread of that era was well on its way to “sponge bread” quality by then. So, for the equivalent amount of money, we’re actually getting better bread.

  8. #8 Sharon Astyk
    February 15, 2011

    John, have you noticed that those boom and bust cycles haven’t exactly resulted in an increase in the farm population?

    Sharon

  9. #9 Don
    February 15, 2011

    This little article appeared yesterday on the last page of Section A of our local paper. I thought it deserved a bit more attention than that; it certainly got mine! There’s nothing like climate weirding to add to the food woes:
    http://www.dispatch.com/live/content/national_world/stories/2011/02/14/chinas-drought-could-cause-spike-in-global-wheat-prices.html

  10. #10 Stephen B.
    February 15, 2011

    If boom and bust were so desirable, then we should get the government out of all the agricultural price support and subsidy programs that have been enacted over the past 90 years as eliminating the boom and bust is their prime reason for being.

    I wonder how many farmers, including John, would be for that?

  11. #11 DavidL
    February 15, 2011

    In my mostly rural area we actually need more middle men. We want to create a food system that is local, and the middle men that exist seem to mostly be national, or at best regional. To keep local food fresh and local we need local middle men to connect local farmers to local outlets or consumers. This part of the food system has been eliminated in lots of places in this country, so that it is easier for me to get a Washington or South American apple then one from the orchards that are less than 20 miles away. This is true for other products as well. Whether they organize their businesses as corporations, or sole proprietorships or something else (a coop would be nice) is less a problem than if they are small and local.

  12. #12 Jim Thomerson
    February 15, 2011

    As said above, the government subsidy programs are aimed at eliminating boom and bust from agriculture. They don’t succed very well because of megafactors, like drought and floods, as well as world markets, which are beyond their resources to mitigate.

    A puzzlement. I have been buying Bosch pears for some 40 years. Forty years ago they were expensive at $1.29 a pound. They have consistently been the same price ever since, and are now cheap at $1.29 a pound. During the 40 year period they have been above or below this price for only a few short periods. Why has this one food item maintained the same dollar price over such a long period of time?

  13. #13 Paul
    February 15, 2011

    Sharon-
    Thanks! Can you tell me the source of the A.V. Krebs quote?

  14. #14 Chad H.
    February 17, 2011

    An international food reserve would help stabilize commodity prices, making it easier for people (both city and country) to adjust to the (new!) long term trend to higher prices. Stabilized prices would make planning and investments possible. We used to have supply ‘smoothing’ programs in the US but large grain traders benefited from its demise and the rise of booms and busts.

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