The Upside of High Food Prices

Reading time: 4 – 7 minutes

As the price at the gas pump continues to climb, so does the cost of diary, grain and meat products. Why? Because increasing fuel prices make it more expensive to grow, harvest, transport, process and package food. Indeed, food costs rose by 4 percent in 2007, the highest annual increase since 1990 [1]. In 2008, the U.S. Department of Agriculture predicts the consumer price index for all food will increase 4.5 to 5.5 percent as retailers continue to pass on fuel costs to consumers [1].

There is, however, an upside to the increasing cost of food. Michael Pollan, author of the book In Defense of Food: An Eater’s Manifesto, argues that as the price of fuel and commodities rise, nutritionally questionable, high-profit ingredients like high-fructose corn syrup will also cost more [2]. And as prices rise, consumer demand for products containing such ingredients will fall.

This is good news for producers of sustainable foods — locally grown produce and locally raised meat — that don’t rely on fossil fuels. Locally grown foods are fresher, better tasting and healthier than food that’s been shipped or flown in from further away (we won’t even discuss heavily processed foods). Sustainable food producers haven’t felt the increasing cost of fuel like factory farms, making them more economically competitive in today’s marketplace. Even so, a recent Ohio State University study found that grocery store shoppers are willing to spend more for locally grown foods [3].

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Creative Commons License photo credit: alykat

The study was published in the May issue of the American Journal of Agricultural Economics. Researchers evaluated data from 477 surveys at 17 Midwestern locations, including retail grocery stores, on-site farm markets and farmers markets. In the survey, shoppers were presented with two baskets of strawberries under 80 different combinations of price, freshness, farm location and farm type. After presenting the options, shoppers were asked which basket of strawberries they would buy. The average retail shopper was willing to pay 48 cents more for strawberries produced locally (in the study, local meant grown within Ohio). Shoppers at farm markets were willing to pay even more at 92 cents extra. Freshness was also found to be important factor for shoppers. Retail shoppers were willing to pay 54 cents more for fresh produce that was recently harvested. Again, farm market shoppers were willing to pay even more at 73 cents extra.

According to Marvin Batte, Ph.D., a co-author of the study and professor of Agricultural, Environmental and Development Economics at Ohio State University [4]:

Statistically, we sorted out what explains each person choosing one basket over the other. We were able to determine how important price was, how important where the strawberries were produced was and whether the freshness guarantee was a factor. Basically what made the biggest difference was local production.

The Washington Post ran a great story earlier this week about the benefits of fruit and vegetables. To Produce Good Health, Bite Into Fruit and Veggies reveals some of the reasons why these food provide so many health benefits. The article also suggests that fresh fruits and vegetables are inexpensive and more accessible over the summer months:

Scientists are just beginning to fully understand the power of produce. And the start of summer provides a great opportunity to expand your nutritional horizons by sampling the foods that will come into peak season during the coming months. Seasonal fruit and vegetables cost less than produce available at other times of year, so they can help stretch your food dollars.

Nobody likes to pay more for food. But if increased food costs force people to find locally grown alternatives and eat healthier, there is indeed an upside to the high price of food. For more information on farmers markets, family farms and other sources of sustainably grown food in your area where you can buy locally grown produce and grass-fed meats, visit LocalHarvest.org.

What are your concerns about the cost of food? How are you dealing with increasing food prices?

References

  1. Food CPI, Prices, and Expenditures: CPI for Food Forecasts. United States Department of Agriculture, Economic Research Service. Accessed 2008 Jun 20.
  2. Some Good News on Food Prices. The New York Times. 2008 Apr 2.
  3. Darby et al. Decomposing Local: A Conjoint Analysis of Locally Produced Foods. American Journal of Agricultural Economics. 90(2):476-486. 2008 May.
  4. Average shoppers are willing to pay a premium for locally produced food. Ohio State University Research Communications. 2008 May 20.
About the Author

Walter Jessen is a senior writer for Highlight HEALTH Media.

Comments

  1. Great post, but I do have to disagree with “Sustainable food producers haven’t felt the increasing cost of fuel like factory farms, making them more economically competitive in today’s marketplace”. As a CSA share owner and restaurant owner, I have seen the effects of gas and milk prices directly effect the wholesale price of products. We try to get most of our organic meat, line caught fish, organic dairy, and vegetables we can within a 50 mile radius, and all of our vendors have raised their prices significantly or added a fuel surcharge.

    Even in the farmer’s markets, the vendors have cut back on how many they can attend due to the high price of gas cutting into their already slim margins. I agree that as some food prices go up, there will be more of a shift towards locally grown produce, but it still comes down to the wallet.

  2. Hi Alex: You caught the one sentence I had trouble writing! I didn’t mean to imply that sustainable food producers haven’t felt the increasing cost of fuel (perhaps I should have written “as much as” instead of “like”?). What I meant was that even with increased prices of both locally grown and factory farmed foods, the cost difference between them is smaller than it used to be, making sustainable foods more attractive. Thanks for your comments.

  3. That is an important point that you cite here. The rise of the oil price will produce many similar effects. Of course it may be hard in the short run to adapt to the new reality. But in the long run the positive effects will by far outweigh the problems. Food has for many years been much too cheap and the actual situation is just a normalisation.
    With rising prices quality becomes a more important factor and the difference to mass-products will decrease. That makes it easier for the customer to choose the better products.

  4. I hope that a healthier and perhaps (wishful thinking) wiser America becomes one of the positive results, as you say.

  5. Great post!!! The wholefood movement and others such as buying locally will hopefully show huge benefits for our health and that of the planet. I guess the challenge is getting everyone to buy and eat this increasingly more cost effective produce (as opposed to fast food).

  6. @Bergmann: Exactly. As the difference in price between sustainable and factory farmed foods becomes less, more consumers will choose the better products. Thanks for your comments.

    @Jean: I hope so too!

    @Dragonfly: Thanks! As Alex noted above, the challenge becomes less difficult as the price difference between sustainable and factory farmed foods becomes negligible. Thanks for your thoughts.

  7. It would be great if that were the case, but my worry is that these small farmers are so close to going under, that just a small change, such as increasing gas prices just pushes them under. This is certainly something that I’ve heard on NPR, many of the small farmers just cant continue.

Trackbacks

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