Is Food Really More Expensive?
We hear from a lot of consumers today about how expensive food has become, and there is no question that the spike in commodity prices over the last two years has impacted everyone’s wallet. That said, the trend over the last 50 years has been for lower food prices on a relative basis, and in real dollar terms we have seen very moderate growth.
The drivers of this remarkable trend in the food economy have been twofold; increased productivity (measured by output per acre) and to a larger extent, the marketing of “modern” food. These factors are of course related and the result of a very misguided federal policy.
US agricultural policy has been driven by the corn and soybean lobby and today, as a result of their success, you will find corn, soy and their derivative products in almost every packaged food. Since 1960 the US population has grown by 72%, while corn production has more than tripled (planting has grown about 30% and yields have tripled) and soy production has grown over six fold (planting has tripled and yields have doubled) (http://www2.econ.iastate.edu/outreach/agriculture/periodicals/chartbook/Chartbook2/Tables/Table10.pdf) . Rest assured, Americans aren’t directly eating all that as corn on the cob and edamame. Instead we are feeding livestock (meat consumption is up 25% over this time period) and creating an incredible array of food products with ingredients like high fructose corn syrup, and soy isolates. In fact in your average grocery store today you will find close to 50,000 items on shelf to choose from and most are made from only 20 of the more than 20,000 edible species available on earth. (http://www.pfaf.org/user/edibleuses.aspx ).
The proliferation of products has been driven by large food companies’ need to deliver increased quarterly profits. To do this they have focused on cost reduction which is typically done by substituting less expensive ingredients – many corn or soy based – for simpler primary foods that appeared in the original recipes. Why make a cereal out of a true whole grain if you can do it more cheaply by making a flake from a paste of the less valuable parts of the grain – or so the thought goes. Over the decades this trend has steadily eroded the nutritional value of our food and resulted in ingredient statements that take up a good portion of the product label. Most of the items are there to make up for the more expensive part that has been taken out, or to add “shelf life” to the product so that the supply chain can become more efficient. When I worked at “big food” we used to call this “slicing the salami” – you don’t notice the little changes until one day you look up and the whole thing is gone.
Consumer health has been the least important part of the equation, and is also one of the more difficult outcomes to measure. Impacts occur over decades and finding the root causes of a health issue, like the current obesity epidemic, are difficult to pinpoint. That said, when I recently updated the chart below, it is hard to imagine that there is not a causal relationship.
* Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group; U.S. Department of Commerce, Bureau of Economic Analysis; and U.S. Bureau of the Census.
* USDA Economic Research Service
Adjusted for real inflation, we are spending about twice as much on food today as we did in 1960 and about 17 times as much on health care. That’s right 17 times as much. Yes, food is more expensive, but it is a far cry from the cost of Lipitor. In 1960 the average American spent $415 on food and $150 on health care. In those same (adjusted) dollars, Americans now spend $899 on food and $2584 per year on health care.
So the next time you are standing in the grocery store feeling the pinch in your wallet, realize that you can make a choice. Spending on good quality healthy food may save you a lot of money, improve your quality of life and help get our country back on a productive path!
Be well!
Rob
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