Wednesday, 20 April 2011

Higher Food Prices: Who's Wining, Who's Losing

The one thing we can say for sure is that the world's poor will pay dearly for rising food prices, the rest gets a little murky.  Low income Canadians do struggle to feed themselves, but on average Canadians pay around 10% of their disposable income for food, more when eating out is added. Europeans pay a little more, Americans about the same.  One benchmark used by some farm groups is to look at  the number of days it takes the average Canadian to work for the income needed to pay the year's food bill. It's 43 days now (February 12th has been billed as Food Freedom Day).   As  food prices rise as expected through 2011, determining Food Freedom Day in 2012 will give us some insight into how much this is hurting. I suspect though that most people's attention will be on the oil and gas bill, petroleum prices are rising even faster right now.

The other important measurement is how the Canadian food dollar is split between farmers, processors, wholesalers, brokers and retailers, in other words, who gets the money.  Several studies show that famrers get on average about 27% of the food dollar. It's a share that's fallen steadily over the last twenty years.  It's also widely different depending on the crop. With the "bulk" crops like wheat and potatoes, farmers get just a fraction of the price: 6% of a loaf of bread for example, a potato grower gets less than what's paid for the GST on french fries. Farmers get more for fruits and vegetables.

 Here's a quote from a recent study found here:

"There was a rise in the cost of groceries by 3.2 per cent from 2008 to 2009, and this money was not
passed on to the farmer. In fact, producers received 1.7 per cent less money than in the previous
year. In the end, the consumer was paying $6.01 more for groceries, the farmer received $0.86 less,
and the middleman received $6.87 more. Depending on the food group, the farmers' share percentage
ranged from 5 per cent for grain products, to 53 per cent for milk and alternatives."

The higher percentage for milk shows  Canada's "supply management" system at work, efficient farmers are guaranteed a fair return. It also highlights the challenge facing farmers not under supply management to get a fairer share of the consumer dollar.

And if the business pages are to be believed, none of the "middlemen" are having fun right now. Large food processors complain about rising costs, meat packing operations say their margins are razor thin, food retailers talk about a very competitive environment.

Internationally many complain about food speculators, investors who look at wheat stocks the same way they see oil or steel.  France's Nicolas Sarkozy has been particularly critical of this. (I'd like to think Dante has a circle ready for this bunch.)

Farmers and consumers both have opportunities to "by-pass" the middlemen, at farmers markets, or through CSA (Consumer Shared Agriculture). There's  hardly a potato packing operation on PEI now that doesn't have a little stand to sell directly to consumers.It's a tiny percentage of the food business in the Maritimes, but it's the fairest bit of business you'll do all year.

1 comment:

  1. Great post Ian, agreed. Unfortunately we live in a world where cell phones are considered a necessity while we complain that the price of vegetables has gone up a few cents.
    As for the developing countries and the world's poor, I fear that it will get much worse before it gets better. Before agri-BUSINESS gets back to agriCULTURE and GMO's and non-native crops are replaced with small, local farms feeding communities together.
    Keep up the great work!