This week we’re going to look at the money we spend on food, particularly at the rising cost of products and how much we spend. In short, while food prices have gone up each year, the proportion of our income we spend on food has decreased. So, over the years, we’re spending less of our money on food even though prices are rising. What does that mean?
Rising cost of food
According to the USDA Economic Research Service, the Consumer Price Index (CPI) for all food increased 5.4 percent in 2007. Food-at-home prices (food bought in stores and other retailers to eat at home) increased 5.7 percent, while food-away-from-home prices (restaurants and other eating establishments) rose 4.1 percent in 2007. (In 2008, the CPI for food increased 5.5 percent – the largest increase since 1990; food-at-home rose 6.4 percent while food-away-from-home increased 4.4 percent.)
In 2007, the following products increased in price:
Butter up 31%
Cheddar cheese up 65%
Nonfat dry milk up 117%
Broiler chickens up 17.5%
Beef, select, up 12.8%
Corn up 70%
*Wheat up 60%
Reasons for the increase in food prices include:
- Ethanol. Corn prices rose 70 percent in 2007 due to demand for ethanol (a fuel made from corn). And because of the demand for corn, more was planted, meaning that less acreage was used for soybeans, wheat, oats and barley, so their prices increased between 5 and 35 percentWorld demand. As countries like China and India develop more of a middle class, demand for food increases, driving up the cost.
Oil. As oil prices increase, the cost of producing and transporting food increases.
Other factors that contribute to rising food prices include poor harvests, bad weather and a weak U.S. dollar.
(From Market Watch, * from U.S. News & World Report)
This means that the food you regularly purchase costs more without you changing any purchasing or eating habits. For someone on a budget, this can have a big impact. The Financial Times reported in March that farmers will plant fewer acres of major crops in 2009 because of lower prices and higher costs for inputs like fertilizers, which will likely further increase food prices.
According to the USDA, in 2007 U.S. consumers spent 9.8 percent of their after tax income on food, a percent that has remained constant since 2005.
Compare this with previous years:
Year Percent of income spent on food
As you can see, we’re now budgeting a much smaller share of our paycheck for food than Americans did in the 1940s and 50s.
The USDA reports that residents of low income countries spend, on average, 55 percent of their income on food; those of middle income countries spend 35 percent, and residents of other high income countries spent 16 percent on food, far more than U.S. consumers.
Why do U.S. consumers spend such a small proportion of their income on food when people in other countries spend much more? One reason is that higher income countries simply have more money to spend. In addition, subsidies are likely a large part of the reason. Between 1995 and 2004, the U.S. government awarded $143 billion in agricultural subsidies, overwhelmingly to huge agribusiness farms that grow corn and soybeans. These subsidies result in cheaper ingredients for processed foods, which are largely made with corn and soy, as well as cheaper feed for animals. That, in turn, means the food you buy is less expensive. However, it’s important to note that these subsidies are actually paid for by U.S. consumers with our tax dollars. If you watch movies like Food, Inc. (out in theaters on June 12th) or King Corn, you’ll learn how corn, for example, ends up in so much of our food. Whether it’s called corn, starch, high fructose corn syrup, dextrose, or some other name, corn today is found in bread, beef, ketchup, beer and in many other products you may not expect.
Americans have become used to cheap food, and we expect it. I even balk sometimes when I see prices at the farmers market – but that’s partly because I’m used to seeing all those advertisements for dollar value meals and the sales of processed food in the grocery store, where many items sell for very little. But instead of just looking at how cheap our food is, maybe we should start looking at the value of what we’re getting. For example, a box of processed food with little to no nutritional value – that you’ve already partly paid for with your tax dollars through farm subsidies – may fill you up in the short term, but you’ll soon be hungry again because your body is looking for nutrients – for vitamins and minerals – to keep your energy up and to keep you healthy. Maybe we should start looking at a food’s nutrient load instead of just how cheap it is or how much quantity of product there is, because it’s the nutrients that will satisfy you in the long run – not the bulk.
So what happens if you decide to eat more wholesome, unprocessed foods – those that are probably not subsidized by the government? Odds are you’ll have to pay more for some of them. This is one of the reasons why sustainable and organic foods can cost more – they don’t receive the massive subsidies that other foods do.
What can you do?
Food prices are going up for various reasons and, as consumers, we’ve been spending less and less of our income on food purchases, so what do you do if you want to eat healthier?
After paying for essential expenses like housing, transportation and utilities, some of us have enough money left over to change other spending habits and to direct more of our money toward food. For example, look at what you’re spending on non-essentials like clothing, travel, entertainment, and fancy coffee and see if you can shift more toward food. Why not try spending 16 percent of your disposable income on food, like people in other high-income nations? Read our previous posts for suggestions on ways to save money.
Grow your own. I know I’ve mentioned this in several posts, but I cannot overstate the benefits of growing your own food – no matter how little. Some people are on such a tight budget that they don’t have any extra money to spare to buy sustainable food. We’ve offered many tips in previous posts about what can be done to help supplement your diet with healthier food, and the best suggestion is to plant your own garden. If you don’t have a yard, see if there are community plots in your area, or if any of your friends have garden or lawn space they wouldn’t mind sharing with you. (Yardsharing is becoming more and more popular!) If you can’t tend to a garden every day, share your garden space with several friends or other families and take turns watering and weeding the plot. You’ll not only get great food, you’ll have a better sense of community with your neighbors. If you don’t know anyone with garden space, put up signs in your local stores, post office, coffee shops, and laundry facilities and find other like-minded people.
Cook more. Even if you can’t spend more on food, cooking with simple ingredients, including fruits, vegetables, grains, legumes, pasta, and some meat and eggs almost always costs less and provides better value than pre-packaged meals like frozen dinners. Cooking can also be cheaper and much more nutritious than fast food or restaurant meals. We’ll talk about this more in next week’s post.
(Diane Hatz is the Founder of Sustainable Table, Executive Producer of The Meatrix movies and co-Founder of the Eat Well Guide. This is the 12th installment in her series Sustainable Table’s Guide to Good Food.)