Thursday, August 4, 2011

Food prices: home and abroad

Though food prices in the U.S. continue to trend higher, a report by the USDA’s Economic Research Service (ERS) shows that Americans continue to spend a smaller percentage of their disposable income at the grocery store than ever, and have by far smaller food budgets than citizens of any other nation.

U.S. retail prices for all food rose 1.8 percent in 2009 and 0.8 percent in 2010, numbers which include prices for both “food away from home” (restaurant meals, etc.) and “food at home” (retail-purchased food prepared and consumed at home – traditional home meals).

Food away from home prices rose 3.5 percent in 2009 and 1.3 percent in 2010. Food at home prices rose 0.5 percent in 2009 and 0.3 percent in 2010. These numbers are at least partly influenced by consumer purchasing habits; as away from home costs increased, many consumers reduced their consumption of restaurant meals and increased consumption of home-prepared meals. As demand for restaurant meals fell, restaurateurs lowered prices to draw more customers to their establishments.

Food prices are forecast to continue to rise over the next 24 months however, with all food increasing 3-4 percent in 2011 and 2.5-3.5 percent in 2012. Food away from home prices are forecast to rise 3-4 percent this year and 2-3 percent next year, while food at home prices are forecast to jump 3.5-4.5 percent this year and 3-4 percent in 2012.

A table of food price index changes is available online at

While food price increases are unwelcome, U.S. consumers spent only 9.4 percent of their disposable income on food last year, tying the record low percentage set in 2009. This figure is the lowest since 1929, the first year ERS began compiling annual food spending reports.

To put 9.4 percent of disposable income in historical perspective, Americans spent around a quarter of their income on food between 1929 and 1935 – ranging from 25.1 percent in 1933 to 23 percent in 1931 and 1932. Those numbers began to decline in 1936 and have generally trended down ever since, falling into the teens in 1936 and finally falling below 10 percent in 2000.

A table of food expenditures as a share of disposable income is available online at

In comparing U.S. food expenditures to those of other nations, a slightly different number is used – “Food Share of all Expenditures.” These numbers are derived from World Bank data and describe the total percentage of per capita gross national income spent on food rather than percentage of per capita disposable income. The latest published figures are for 2008.

U.S. consumers spent by far the lowest percentage of gross income on food at 5.9 percent. Consumers in other “high income” countries spent as follows: 7.7 percent in Singapore, 8.5 percent in the U.K., 9.9 percent in Germany, 12.5 percent in France, 13.6 percent in Japan, 14.3 percent in the Czech Republic, and 14.5 percent in South Korea.

Percentages in “upper middle income” countries ranged from 14.1 percent in Hungary to 31.8 percent in Romania. For consumers in “lower middle” and “low” income countries, food expenditures ranged from 24.1 percent in Brazil to 41.9 percent in Indonesia.

Though consumers in other countries around the globe continue to pay higher food prices and spend a larger proportion of their gross income on food than U.S. consumers, the overall global food bill has been trending down. In 2002, the percentage of gross income spent on food averaged 12 percent in high income countries, 26.1 percent in upper middle income countries, and 36.6 percent in lower middle and low income countries. In 2008 those percentages had fallen to 11.5 percent in upper income countries (down 0.5 percent), 21.5 percent in upper middle income countries (down 4.6 percent), and 33.9 percent in lower middle to low income countries (down 2.7 percent).

A table of worldwide food expenditure patterns is available online at

These numbers are remarkable but don’t, of course, tell the entire story. Global food cost data from 2008 to the present day is sketchy at best. Solid data analyses generally take 1-3 years to complete, so today’s real numbers are in some sense impossible to know. We can guess that the global economic downturn since 2008 has most likely increased food costs around the globe, though to precisely what extent it’s impossible to say just now. We also know that global food production numbers have been trending up in recent years as modern agricultural production techniques continue to trickle down into less industrialized, more agrarian societies.

The joker in the global food cost deck may well prove to be the health of the U.S. economy. If congress can find a way to get runaway spending under control, America’s economy will continue to drive the world economy. A healthy U.S. economy will ensure continued advances in agricultural production as ag sector profits in this country allow continued research, development and implementation of techniques and technologies to boost food production. Increased production will continue to trickle down to the poorest countries, easing hunger and raising the overall lot of humanity to unprecedented levels.

Failure of the U.S. economy may spell more than tough times for Americans. Without the driving force of a healthy U.S. economy, food production may begin to trend down both here and around the globe, perhaps raising the curtain on an unprecedented age of darkness.

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