Food prices seem high right now. And they are.
But take a step back to look at the bigger picture and you’ll witness one of those chin-scratching miracles of industrialisation: the price of food has been falling steadily as a share of income since your grandad was shovelling coal.
In OECD countries, the proportion of income spent on food is about 8%. Even in these inflationary times, that might nudge up to 10% but it’s nowhere near what it was in 1929 and still a fraction of what it is in developing countries – as high as 60%.
Compared to the cost of housing, food is peanuts.
Why?
“It’s a mix of reasons,” says Aidan Connolly, an agritech investor and author of The Future of Agriculture. He’s talking to me ahead of the E Tipu/IFAMA conference in Christchurch next month where, as president-elect of IFAMA, he’ll be a keynote speaker.
“The genetics of plants and animals have improved, which has affected productivity. There’s better and more precise use of nutrition in feed and nutrition in diets overall; smarter use of water and land; and better understanding of animal welfare. And then there’s been a reduction in waste in the system to achieve much greater efficiency.
“It’s all being driven by a shift to larger farms, which is not always the popular thing to say, but the intensification and industrialisation of farming has reduced the cost of food for the average person, dramatically.”
What makes this especially impressive is that since 1930, the global population has grown fourfold. “As Warren Buffet said at the recent Berkshire Hathaway meeting; ‘In my lifetime there have been four times as many people being fed and they’re not just eating lettuce.’”
Aidan Connolly: consumers make trade-offs but ‘food or no food’ is not one of them
The hidden cost
The downside of course is that cheap food comes at a cost. Industrialised food is responsible for animal abuse at an industrial scale, with inventions such as feedlots, the factory farm, intensive grazing, winter grazing, slaughter chains and battery hens.
Agriculture is on track to become the largest GHG emitter globally and already is in New Zealand. It’s also responsible for 85% of the world’s deforestation, not so much to farm cattle but to grow feed. and it’s the main source of nutrification and run-off that’s polluting New Zealand waterways.
Aidan Connolly says food production is hitting a ceiling. “Can the price of food keep falling? Not without continued productivity gains.”
But productivity is up against a suite of constraints, not the least climate change. “The world is in danger of going through 1.5 degrees of warming in the next four years. If that’s the case, lots of areas that have been producing food will not be producing food and we’re going to have to find new places and new ways to grow food. Water will be, in my view, the critical limit in allowing us to do that.
“The parts of the world that have abundant water have a massive advantage over those that don’t.”
There are other constraints. Connolly lists labour in his top three (along with water and climate). “People generally do not aspire to work on the farm the way that they did in the past especially doing things like picking strawberries and fruits by hand. Or working in processing plants. They’re nasty hot places reliant upon some degree of immigrant labour and but that labour is becoming harder to find.”
Two-headed consumer monster
Are consumers aware, if not sympathetic to these constraints? Will people pay more to help address these hidden costs? Yes and no. Connolly says we may not have any choice, just as we are experiencing now thanks to the invasion of Ukraine is impacting grain prices and Covid impacted logistics.
But given the choice, consumers will continue to demand lower prices. “I think we’re dealing with a two-headed consumer monster. I’ll tell you that I want to have my food produced ethically and sustainably but when I feel poor, I don’t know, I might start buying my food from Aldi or Walmart. When I feel poor the trade-offs change: if it comes to standing on principle or eating food we will always choose food.
“So how do we marry all of these pieces together? Of course, the ideal is to provide foods that are affordable while at the same time meeting as many of these sustainability, welfare and ethical parameters. But at the end of the day, food is not optional.”
To hear more from Aidan Connolly attend the E Tipu/IFAMA conference or download his book for free
Food is cheaper than ever:
- You might not believe it from what you read in the papers or internet headlines, but for most people in the
- world, the price of food as a proportion of their income has never been lower.8% of their income on what they eat; China 22%, India 30%, Brazil 20%
- and a USDA report shows that 2018 was the first year more US
personal income was spent on food eaten away from home than on food at home. Africa 60% of consumer income
- European countries have seen the proportion they spend on food halve in
the past 20 years.
Fewer farmers
- only 2% of its population works to produce food and agricultural
- UK a mere 140,000 farms, employing less than 0.8% of its population. Agriculture may be producing more
than ever but, as a percentage, agriculture contributes less than it ever has to world Gross Domestic Product
(GDP). As a result, an increasingly urban population is completely disconnected from the realities of how food is
produced.
Less land?
Trade is shrinking? These are high profile cases but is the direction still towards a more connected globe?
- Brexit
- USA v China
- Russian invasion of Ukraine
Demise of the supermarkets
- Rise of online alternatives
- Shrinking categories: cereal aisle is the most dangerous; soft drinks
