According to the Australian Bureau of Statistics Household Expenditure Survey, the median Australian household spent $1,185 per week on goods and services in the 12 months to June 2016 with food and non-alcoholic beverages accounting for $197 or 17% of total expenditure (roughly 12% of income).
This is a hefty amount that has indeed been rising as a gross sum since the 1980’s but with a declining percentage.
This means that relative to overall wealth, what Australian families spend on food has declined.
Not eating the pantry after all.
Data source: Australian Bureau of Statistics Household Expenditure Surveys
It might feel like food is more expensive but not so.
A proportional spend of around 10-15% relative to income is fairly consistent across developed economies. Around a billion people get their food for a song.
The global south
However, this spend of less than a sixth of income on food applies to the developed economies. As this graphic from Washington State University based on 2008 data shows the majority of the world’s people live in countries with transitional or developing economies. These people spend at least a third of their income on food and in low-income countries, it is close to one half of household income.
This is also the picture that gives us the global north and the global south.
Most of the incidence of child malnutrition due to insufficient nutrient and calorific intake happens in countries in Africa, parts of Asia and South America where households spend a third or more of their income on food.
If food prices doubled in Pakistan or Indonesia then many people would be under serious financial pressure to meet all their other essential household expenditures. They would become hungry or destitute in a short period of time.
Not surprisingly in many of these countries, food prices are important to people. They pay attention to prices and when they start to rise unease and unrest often follow.
A loaf of bread
I remember back in the late 1980’s when I was a fresh-faced academic at the University of Zimbabwe, a loaf of bread was 30c. These oblong objects were quite tasty on the morning they were baked, but by the evening they were a tad hard and after a day it was wiser to use them as household bricks. At 30c though, they were an important staple.
Towards the end of my time in that magnificent and troubled country, the price of a loaf went to 50c. There was mayhem. Everyone was livid and for weeks it was the only thing people wanted to talk about. They shouted, protested and, in the end, had to pay 50c.
In April 2020 the long-suffering Zimbabweans who after knowing the Gods were crazy when a loaf cost Z$1 million during the hyperinflation of 2007 and 2008, were freaking out again as bread went to 3.50 RTGS dollars a loaf, up from 1.80 in just a few days.
RTGS is the Real Time Gross Settlement dollar, don’t ask.
Zimbabwe is currently in crisis again. In the first quarter of 2021 there is runaway inflation, spiralling commodity prices, and a food shortage. The price of bread is on the rise again reaching $98 a loaf in March.
Global agricultural price index
Given the challenges faced by people in low-income countries, this next graph might come as a bit of a surprise.
It shows that the global agricultural price index when pegged at 100 for 1977-1979 is volatile from year to year but actually declined significantly through the 20th Century on an exponential trend of around -1% per year.
Over the long run, food has become substantially cheaper
The period this graph covers includes the mechanisation of agriculture and the Green Revolution of the 1940’s and 1950’s when irrigation, fertilizer use, and new crop varieties along with numerous agronomic innovations boosted crop yields all around the world, especially in Asia.
It also covers the rise in global container shipping that made food supply chains longer and established the global commodity market.
The long-term trend is for these innovations and the global market to deliver cheaper food.
There are spikes at the First and Second World Wars, the global oil crisis of the 1970’s, and the fallout from the GFC in 2008 but the general decline has meant that food shortages and famine have declined. Cheaper food has contributed to wellbeing and perceived wealth that has probably helped with the overall decline in global conflicts that Steven Pinker has been keen to point out.
It is no coincidence that as the price of food has dropped so the number of people has risen. Hungry people are angry, well-fed people are much more loving.
The reality humanity faces
The global population of humans is still rising and will only slow down over the next decades. The peak population size will be between 9 and 11 billion souls sometime in the middle of the century.
Population growth at 8,000 people per hour is a stark and unavoidable reality.
Cheap food will help to keep these people happy, stable and sedentary.
If food is expensive or there are price spikes, many of them will be very unhappy, their lifestyles will be under pressure and many will be forced to move to find food. Just a brief perusal of human history tells us that such instability is a huge problem, often the root cause of the most serious conflicts. Remember that territory is usually the reason states go to war because the land is where the food comes from or where there is the fuel needed to produce it.
Cheap food is only possible if the supply can meet demand. This is one of the few fundamentals of economics that is true in our capitalist systems. Not enough supply of goods in the right place at the right time and the price rises.
Meeting demand will require ongoing efficiency gains in
- Food production
- Harvest and storage
- Food processing
- Food distribution
- Diet and nutrition choices
Oh my, and I thought a 50c loaf of bread was a problem.
The history of food prices is on our side. Although demand growth has been with us for a while, for the most part, supply has kept up.
Nothing like an economic opportunity to drive production.
The reality humanity faces is to increase food supply and accessibility to cover the locked in population growth and to maintain these unprecedented levels of production for decades.
What sustainably FED suggests…
Our concern here is that so few people really know how critical food security is for the global future.
The general decline in food prices thanks to fossil fuel inputs, production innovations, and global supply chains reaching every possible market has lulled us into a false sense of food security.
This is especially true for the lucky ones in the developed economies.
Whilst the food production challenge is acute, people are imaginative, innovative and courageous. Throw a challenge at a human and most of the time she will take it on. There are solutions and people can bend their minds to find them.
Sustainably FED posts and eCourses delve deeper into the evidence, knowledge and skills needed to help you find these solutions.