How Expensive is Food, Really?

Sharon February 24th, 2008

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.  We are already seeing the early signs of this in Haiti and in other poor nations.

 It is also undoubtably true that rising food prices are digging into the budgets of average people, including me.  And I’ve got it easy. The 35 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 regular folks are really finding that food and energy inflation are cutting into their budget substantially.  The rises in food and energy prices alone have eroded real wages by 1.2 percent.  The USDA chief economist has announced that overall food prices will probably rise by another 3-4% this year, and grain products will rise considerably more. 

But 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 boom.  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, as Jim Webster does in an opinion piece in The Farmer’s Guardian.  He observes something that has long struck me, that historically, it is completely normal to spend a lot of your money on food:

“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.   But can most of the world endure higher food prices? 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 likely to be badly hurt.  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_ that 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.  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 price 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 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. 

What it does 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 crap and entertainment and shift their dollars to food is extremely limited – their jobs often depend on the plastic crap, 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 ethanol is undoubtably good for some farmers, but booms are followed by busts in many cases – given that biofuels produce more greenhouse gasses than fossil fuels and risk creating famine, the bust is nigh-inevitable.  And 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 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.  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 the biofuels boom does nothing in that regard.  In fact, it inserts farmers into another boom and  bust cycle.  What farmers need are stable food prices, probably slightly 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 whole grains instead of processed crap) because they know that the consumers who buy from them will not stop eating when the ethanol plants have to close down. 

 More importantly, we cannot create an 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

13 Responses to “How Expensive is Food, Really?”

  1. Harmony says:

    Hi Sharon! I waited anxiously, checking regularly, for your return and I’m so glad you are back! You are a guiding light to me, as you are a down to earth “real person”, an inspiration to push myself to expand my personal and family efforts. And you do it in a gentle, encouraging style that makes it clear that every step forward is a step forward.

    I have always loved gardening, being in contact with the earth and nature has always calmed my spirit and balanced me. Since I’ve been reading your blog I’ve expanded my garden efforts to getting involved in our local community garden as well as container gardening in my own small yard. Your Victory garden call struck a deep cord in me, I feel it is so important to get more and more people involved in growing their own. Last year my 3 youngest helped in our community garden space and loved every minute. I am a member of my town’s food security group, and find myself frustrated that encouraging people to start or expand their own food growing efforts isn’t going to happen until next year. However I will stick with it, and “gently” try to speed that up.

    I will be converting at least one third of my “yard” to garden this year, a labour intensive project that will be well worth it in expanded garden space. I’m having so much fun going through my Seed Saver catalogue and the on line Seed Trust catalogue (they offer heirloom seeds that do well in short growing seasons) and have mentally placed orders that are at least 4 times the amount I can grow!

    I have to say that when I read comments that our food is “cheap”, I get a shiver of fear. Since I have a large family, the amount of money I spend on food is higher than average, over a third of my totall monthly income, and I avoid processed foods! It doesn’t seem very cheap to me, and is only getting worse. It is a growing incentive to expand my family’s ability to provide for itself.

    Sorry this has gotten so long and rambling, I’m not great at straight to the point writing obviously!!lol! However, one more thing before I go, your blog on knitting inspired me to learn how. I’m only at a beginner level now, scarves and blankets are my current limit, but hope to learn socks in the near future! As you said more elliquently than I, it is a shame (and frightening in a way) that so many skills of our grandparents are now forgotten as our society has become dependant on others for things we used to do for ourselves.

    Thanks for your writings and inspirations, can’t wait for your books!

    Donna

  2. Ani says:

    Hi Sharon-

    Welcome “back”!
    One of the things I have noted is that land prices, at least where I live, don’t reflect what one can actually grow on them but rather, what someone would be willing to pay for the land to build a house on it. So my neighbors bought some land for $6,000/acre- which may seem cheap to some of you-depending on where you live- but the realities of trying to pay that much for what is really marginal land-and make it pay off for agricultural production, as well as the steep property taxes it would incur yearly- not doable. So the land across the road is for sale- and it is marginal land really- good for grazing, some crops- but how am I supposed to come up with that sort of money and grow potatoes on it for market? Someone will buy it and put a house(s) on it……

    I wonder at all of this- as we drive agricultural production further away- due to land prices and then expect to just ship it all back in to the people……

    RE: food prices- yes-just went to the store and picked up a few items- wow- prices are really going up- very little seemed to be “on-sale” that I would even use-

    The ability of people who are living on food stamps and limited incomes to pay these costs is problematic- coupled with the rising price at the pump, heating costs- it’s not going to be pretty. I know I just told my plow guy to forget about plowing the rest of the winter- I have spent $300 so far- and the snow just keeps on coming. I need to save money for wood for next year! I know others are doing the same thing…..

  3. Sharon says:

    Hi Donna and Ani – Trust me, I know what you mean about the budget busting stuff – both the weather (expecting 8-10 inches here tomorrow, just as warm temps have finally melted most of it off ;-) , but also the food. Six of us cost a lot – we can eat down our food storage, and mitigate costs to some degree, but I think things are going to get worse before they better, so I’m reluctant to cut back on our reserves. Sigh.

    Sharon

  4. Stephen B. says:

    One major reason that people have to work so hard at their forced participation in the cash economy is TAXES. Our growth of government at all levels, from condo fees up to federal taxes forces, the avg. US person to work the first 4 or 5 months of the year just to pay taxes. You and Ani both mention taxes briefly, but I think taxes are a much larger part of the problem than is mentioned.

    Now I’m not going to launch an anti-tax, anti-govt speech here (I’m fairly lefty-liberal and like to think that some govt. is actually good), but there’s no denying that the govt. takes my hard-earned cash and spends it on things frankly I could do without, like lots of roads, Stealth bombers, armies of people doing all kinds of things. Even at the local level, lots of tax revenue is spent on worker’s comp, other insurance, fancy, paved roads, and so on.

    Years ago, a person could often “work off” taxes by supplying a few weeks worth of stove wood for the local school or helping the road agent drag some of the local dirt roads to shape them up after mud season, but just try paying local taxes in anything other than $$ now! Maybe, in some tiny locale it still happens, but not around the suburbs of Boston anymore, that’s for sure.

    Taxes are a huge part of why food has to be kept “cheap” for if we spent half of our income on food, how could we pay taxes, (part of which, in turn, are spent on agricultural subsidies to make food “cheap” to begin with?)

    This is one major reason why I try to earn as much of my living as possible *OFF* and *OUT* of the cash economy. The govt. cannot tax me as much when I don’t earn $$ and then they cannot siphon off my productivity to spend on fancy roads, bombers, ethanol kickbacks, etc.

    Property taxes, however, are the one major way even people who otherwise would not heavily participate in the govt.-created cash economy are nevertheless dragged into it.

    ‘Love the new site too!

    Stephen B.
    suburban MA

  5. Ani says:

    Stephen-

    yes- property taxes are a major issue here-and yes- it forces people into the ecconomic system as they have to earn dollars to pay property taxes- even if they own their place outright.

    In my state, we have so-called “income sensitivity” for property taxes- but that is based only on the house and 2 acres- and if you live in a rural area-most people would have more land than that- you can’t even build on a piece that small anymore due to zoning. So no matter how low my income- the land is taxed at the full rate…… Thus this year I paid over ten percent of my pre-tax income as my share of property taxes- the state kicked in some more-but this is pretty crazy. All we have in town are dirt roads, a tiny school and a one-room library…… and as fuel costs climb, so will our taxes, to pay for the road crew, school heating, etc……

  6. Rosa says:

    That’s pretty much the purpose of cash taxes, in a colonial society – a head tax, a land tax, a poll tax – to force people into the cash economy.

    (though I don’t get how a condo fee is a tax)

    Thank you for the post, Sharon. I do think in the long run higher food prices are good for farmers, once they are stabilized – if you take away the anti-small-farmer political situation, both in the developed world and in most of Africa and South America. But I don’t know how we fix our political situation, much less fix it permanently and have supportive programs for the transition.

  7. Jo says:

    Excellent post as always, but my favorite thing was your reference to Howarth’s _1066_! I love that book!

  8. Lisa B-K says:

    New reader here!

    I found this post interesting in light of a NYT editorial I read literally just before I hopped over to yr site:

    http://www.nytimes.com/2008/03/01/opinion/01hedin.html?ref=opinion

    I run the farmers market locally. It steams me that these terrific vendors, many of whom would LOVE to get into grocery stores or expand to meet increasing wholesaler demand, can’t do it, and thus “real food” is less available.

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