According to research by ‘New Which?’ UK food prices are lower in real terms now than they were 30 years ago. White fish is the only food that has risen in price during that period, from £12.21 per kg in 1988 to £14.41 per kilo now. All other foods researched by the magazine now cost less than in 1988.
Sugar—a food close to many of our hearts—has halved in inflation-adjusted terms from £1.44 per kg to £0.75 per kg over the past 30 years. Vegetables have also halved in price over the period, while meat (beef, pork and chicken) have all fallen between 10 and 15 percent. Bananas have seen the biggest fall in price, from £2.82 to £0.94 per kilo. Bananas are the top ‘impulse buy’ foods in UK supermarkets.
‘New Which?’ suggests three reasons why this has happened:
- Increased yields, or what the magazine calls the ‘industrialisation’ of farming;
- Increased imports, or what could be considered as increased competition for UK farmers—either that or economics doing its job through ‘comparative advantage’. It may be cheaper for example, to import winter strawberries from Spain rather than to grow them in UK greenhouses;
- Increased purchasing power of the supermarkets as they compete with each other to be the cheapest.
In the 1950s, UK consumers spent a third of their income on food. By 1974 this had fallen to 24 percent and it is now estimated to be around 10 percent. After Singapore and the US, the UK spends the lowest proportion of household income on food shopping.
However it is not just in the UK that food prices have fallen. The UN’s FAO (Food and Agriculture Organisation) has published an index of world food prices since the early 1960s. In inflation adjusted terms the index is now at the same level as in 1961, and significantly lower than during the commodity price boom of 2006-2012.
This is an extraordinary occurrence when you consider the massive increase in population over the period, as well as the increased diversion of crops to both biofuels and livestock.
On the other side of the coin, energy prices—a major component of food production costs—have doubled in real terms since the 1960s.
Cheaper food my be good for consumers, but it makes life tougher for the world’s farmers. Last year the legendary cocoa trader Derek Chambers retired after 50 years in the business. In a farewell interview he told Bloomberg, “It is a great regret of mine that farmers in West Africa were poor when I came into the business and are still poor, probably even poorer now.”
(He had particularly harsh words for the movement for greater sustainability in the food supply chain: “The business that has grown up around the need for sustainability does not benefit the farmers anywhere near as much as it does the NGOs, companies and individuals involved in the circus.”)
Low food prices don’t just keep producers in poverty, they may also mean increased waste. When grocery shopping accounted for a quarter of a UK family’s budget they probably paid more attention not to waste food than now when it only accounts for 10 percent of the family budget.
Most importantly, current low food prices don’t cover the full cost of producing it: externalities such as deforestation, water pollution, and GHG emissions, along with the declining health of our soils, are currently not paid by anyone. Instead they are building up as debts to be paid by future generations—our children and grandchildren.
There is an old saying in economics that ‘there is no such thing as a free lunch’. Someone is paying – or will pay – the true cost of our food, even if we aren’t!
© Commodity Conversation ®