Why a Century-long Trend for Lower Relative Food Costs may be About to End

Canadian media have featured predictions of higher Canadian food prices for 2016, caused mostly by a cheap loonie and higher prices for imports. But globally, food prices are down 19% since 2014. And a deeper truth is that the percentage of Canadian family income spent on food is at an all-time low.

Canadians now spend about 10% of family income on food says Statistics Canada. Fifty years ago, it was nearly 20%, and still higher 50 years before that. Even the poorest one-fifth of Canadians spends only 14% of income on food – less than half of the 30% they spend for accommodation. And average Canadians waste a reported 20% of the food they purchase.

Canadian husehold spending on food

Percentage of Canadian household income spent on food (Source: Statistics Canada and CBC News)

Food purchases in 2016 also include a much more diverse array of choices – and in more convenient form – than ever before. About 30% of food expenditure is now for restaurant meals.

There are several reasons for the decline, but superior farming technology ranks as primary. Decades of improvements in crop and animal breeding (including ‘genetically enhanced’ crops), better pest control, improved farm equipment, and superior methods for soil management have meant higher productivity and lower costs of production. I received $11/bushel for soybeans sales in 2015, compared to $10 in 1983. But the 2015 return was actually only $5 per bushel in 1983 currency – a 50% decline. Reductions like this, while challenging for farmers, are a dominant reason for declining relative food costs. Consumers have been the big winners from improved farm technology.

Perhaps this trend will continue. There is plenty of potential new technology for improving farm productivity – in many cases with declining input usage (fossil energy, pesticides, fertilizer). Yes, even with climate change.

But a counter trend is gaining momentum – a trend towards higher costs, driven by a combination of government restrictions and consumer/retailer demands.

On the government side, we’ve seen a continual tightening in food safety standards. That’s to be applauded. But we are also seeing a trend for governments (mainly in Europe, but spreading elsewhere) to restrict technology (GMOs, pesticide usage) for reasons which lack a scientific base but which are imposed as ‘precautionary’ in nature. “We’ve no real evidence of any harm, but we’ll ban it anyway.”

A bigger driver may be consumers themselves – along with food manufacturers and retailers eager to exploit ever-changing (and typically high-industry-profit) opportunities.

We have more consumers wanting to buy – and pay higher prices for – organic foods, foods called ‘natural,’ and/or food free of anything claimed by someone to be ‘bad.’ Food ‘quality’ these days is mostly about what food doesn’t contain, not what it does.

Ignoring for this article the issue of whether the result is really better for health or environment, the effect on agricultural productivity is quite clear. US government surveys show organic crop yields average about 30% lower than for non-organic (varies by crop) – and organic price premiums are consequentially substantial. If I’d grown organic soybeans in 2015, I would have received $25 per bushel – with a cost of production about as high.

This is no threat to affluent Canadians. Even a 50% increase in food prices still means only 15% of average Canadian family income – well below the average of 50 years ago. Thanks to Health Canada, Canadian food is almost certainly safe regardless of how produced.

The trend means more land to produce the same food – 40% more, on average, for organic. That may not be a dominant concern in Canada, but it’s impossible globally. The trend may mean greater imports from countries where low-tech and cheap labour prevails. Many ‘Canadian’ organic soybeans now come from India (home for 1/3 of the world’s most hungry people!).

But many Canadians aren’t affluent. If government and food-industry actions reduce availability of lower-cost foods, some families will suffer. There are already several examples of lower-cost-of-production foods either being removed from – or prevented access to – retail shelves because of anti-tech advocacy pressures or market opportunism. There will be more.

Space permits but one example: Costco – facing strong pressures from activists – has announced plans not to handle the new Canadian-developed AquaBounty® salmon, to be grown on confined fish farms. It contains a gene from another salmon species that reduces, substantially, the amount of feed needed by growing fish, and thereby lowering the cost of production – but with no effect on food quality, and reduced pressure on wild salmon stocks.

The trend of declining food expenditures for Canadians, of the past 100 years or more, may well be over.

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