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Still Concerned Over Rising Food Costs?

The County Account by Legislator Michael N. Kelsey
September 10, 2011

Michael Kelsey is the County Legislator for the Towns of Amenia, Washington, Stanford, Pleasant Valley and the Village of Millbrook. Write him at KelseyESQ@yahoo.com

Part 2 of a 3 part series regarding the escalating price of food

Complaining about rising food costs is easy to do, understanding it less so. Before lamenting upon rising food costs at the supermarket a systems-wide analysis and some historical perspective is appropriate. This installment is rooted in the panel discussion transcripts of last December’s joint-departments of Agriculture and Justice hearings in Washington D.C.

America enjoys the best agricultural and food system in the world. Our food is the safest, freshest, best quality and most affordable anywhere on the planet. Despite recent fluctuations in pricing, our food costs are still bargains from only generations ago.

In 1900, the American family was paying 50 percent of their income on food. In 1940, we paid 14 percent. In 2011, on the average we pay 5.5 percent (nine if you count restaurant expenses). This strongly attests to the richness of the American quality of life, at a time when the French and Spanish pay 15 percent of family income on food. The Russians and Chinese pay 30 percent. In Indonesia, families pay 50 percent.

Our society has also moved beyond price as the sole consideration of value. Consumer demand now also considers quality and food safety. We want to know where the food comes from, how it’s handled and to some degree specifics including animal welfare, sustainability, and feed or fertilizers used in production. This level of transparency brought on by customer demand, like packaging, has in some instances raised consumer price. At other times it has increased sales.

Consider the reinvigoration of consumer interest in the meat consumption industry resulting from branding after a near 50 percent decline between 1979 and 1998. Then retailers began branding products under labels that conveyed trust and credibility to the consumer that the product was qualitative and met acceptable standards. While branded products increases sales (approximately 20 percent), advertising also adds to food costs. Today two-thirds of the marketplace is filled with branded products breeding consumer reliability, but doing so by disconnecting consumers from producers (farmers). Oftentimes it also cuts deep into the farmer’s profits.

Consider for instance how after-farm costs to food are distributed. From 1989 to 2009 the retail value for choice beef rose from $2.66 to $4.26, about a 60 percent increase. However farmers only experienced a 12 percent increase in profits as retailers, wholesalers, distributors and others capitalized on the increase. For pork the price actually fell in that 20-year-period from 87 to 77 cents a pound.

Compared to 1990 when farmers received 24 cents of every grocery store dollar, today they receive only 19 cents. Their portion of beef sales is down by a third from 1990, pork sales down by almost 50 percent.

Efforts must be made to correct pricing margins, because when farmers are short-changed it poses serious risks to industry sustainability. Consider that since 1980, nationally 90 percent of the pork producers have ceased to exist (the national count went from 667,000 to 67,000). The number of cattle producers fell from 1.6million in 1980 to 975,000. Dairy farmers have also plummeted from 110,000 in 1990 to 65,000 today.

Without market fairness and sustainable pricing we endanger the very future existence of the farming profession while also jeopardizing the American way of life of affordable home-grown food. Policy decisions “ both public and personal “ need to be supportive of farmers.