High food prices | payable by some

High food prices are to be avoided. At least that is the common message.

Food is so central to well-being that any threat to its ongoing supply hits us at a personal level. We need to feel secure about where the next meal is coming from and only relax when we know.

In the West, where economies are robust enough to allow full access to commodity markets, financial clout ensures that food supplies to consumers rarely run short.  Modern supply chains deliver produce everywhere at any time of the year and bulk purchases help to buffer price fluctuations.

Along with this surety in supply, a food crisis is not really felt by the western consumer because the percentage of average household income spent on food is low — just 6% in the US and 9% in the UK.

So even if food prices double, it is only a relatively modest impost on the household budget of the average American or European. It would be annoying but not catastrophic.

In India more than a third of average household income is spent on food and in Kenya it is 45%. If food process double in Kenya many families would have to spend almost all their income on food. It makes living in cities where there are so many other costs from rent to travel, all but impossible.

When jobs are scarce and income is low, food becomes a large portion of total spend. High food prices just put more pressure on a difficult situation.

Engel's law

High income, low percentage spent on food, and its opposite [low income, high percentage food spend] is so common a pattern that 19th century German statistician, Ernst Engel, made it into a law.

What this law means is that high food prices have far less of a consequence for people in mature economies.  If incomes are high then food is not such a big part of the family budget and families can absorb fluctuations in price.

Only this relative affluence is recent. A couple of generations ago, world wars and the great depression made food shortages acute and the cost of food was significant for everyone.

I recall my mother, who grew up in the post-war years, adding swede to the mash potatoes to make them go further and had the extraordinary ability to make a Sunday roast chicken somehow feed the family with chicken rissoles on Monday.

And one in three humans alive today must do something similar.  Over 2 billion people live on less than $2.50 per day and only one in seven has the resources to cook steaks on the barbecue.

The majority of people out of the left of the a graphic of Engel’s law — they feel food prices acutely.

In these circumstances subsistence agriculture, that may seem primitive, can deliver this food security more effectively than having to buy the food you eat.

Pragmatology of food prices

High food prices cause different environmental issues depending on where in the world prices rise.

Even in the West we are sensitive to the price of food. We balk when prices rise and not always attracted to the supermarket specials that save a few cents. This is despite the fact that food costs are a declining proportion of household budgets.

In Africa, the sub-continent and parts of Asia a spike in food process causes severe hardship, especially to the poor.

The environmental issue here is that high food prices are actually a requirement to pay the full environmental cost of food production. When a kilo of onions can be sold for one dollar in the store, then the farm gate prices are so low that it is very hard for even diligent farmers to keep the soil healthy.

Food production becomes mining and mines run out of reserves.

If it were possible to have high food prices where a proportion of that price went not to profit in the supply chain, but to maintaining the production system, then…

…reserves would last a lot longer.

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Lately the price of a kilo of onions in supermarkets in Sydney Australia is $1, something of a bargain for those fond of French onion soup. Not even the most efficient farmer on highly fertile soils can produce onions at a few cents a kilo and stay in business.  Those that try will have to mine the natural capital in the soil or supply a subsidy through external inputs.

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