MarkAccording to the Australian Bureau of Statistics Household Expenditure Survey, which tracks food prices over time, the median Australian household spent $1,185 per week on goods and services in the 12 months to June 2016.
Food and non-alcoholic beverages accounted for $197 or 17% of total expenditure, roughly 12% of household income.
$197 is a hefty amount that had been rising as a gross sum since the 1980s but with a declining percentage. This means that relative to overall wealth, what Australian families spend on food has declined.
They are 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 relatively consistent across developed economies.
Around a billion people get their food for a song.
The Global South
Spending of less than a sixth of income on food applies to the developed economies. Elsewhere in the world the situation is different.
A 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; in low-income countries, it is close to one-half of household income.
This picture 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, many people would be under severe financial pressure to meet all their other essential household expenditures. They could become hungry or destitute in a short period of time.
Not surprisingly, food prices over time are important to people in many of these countries. They pay attention to food prices and when they start to rise, unease and unrest often follow.
A loaf of bread story.
In the late 1980s, when I was a fresh-faced academic at the University of Zimbabwe, a loaf of bread in my local supermarket in Harare cost 30 cents.
These oblong objects were quite tasty on the morning they were baked, but by the evening, they were a tad firm, and after a day, it was wiser to use them as household bricks.
At 30 cents, 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 50 cents. There was mayhem. Everyone was livid, and it was the only thing people wanted to talk about for weeks. They shouted, protested, and ultimately, had to pay 50 cents.
In April 2020, 30 years after my time in the country ended, 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.
In the first quarter of 2021, Zimbabwe was in crisis again with runaway inflation, spiralling commodity prices, and a food shortage. The cost of bread reached $98 a loaf in March.
Whether food prices over time are reasonable or terrible or somewhere in between depends on where you live and your relative food insecurity.
A loaf of bread is a luxury in Zimbabwe and many low-income countries that have to import wheat
Global agricultural price index
Given the challenges faced by people in low-income countries, including spikes in food prices over time, the following graph might come as a bit of a surprise. It shows the global agricultural price index pegged at 100 for 1977-1979.
The price of food is volatile yearly but declined significantly through the 20th Century on an exponential trend of around -1% per year.
Over the long run, food has become substantially cheaper.
This graph comes from Fuglie, K., and SL. Wang. 2012. “Productivity Growth in Global Agriculture Shifting to Developing Countries”. Choices. Quarter 4.
Why the Agricultural Price Index went down
The period this graph covers includes the mechanisation of agriculture and the Green Revolution of the 1940s and 1950s when irrigation, fertiliser use, new crop varieties, and numerous agronomic innovations boosted crop yields worldwide, 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 trend in food prices over time 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 1970s, 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, which has 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 of food prices over time
The global population of humans is increasing and will continue for many decades. The peak population size is expected to be between 9 and 11 billion souls sometime in the middle of the century.
In the meantime, 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.
A brief perusal of human history tells us that such instability is a huge problem, often the root cause of the most severe 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—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 global demand for food will require ongoing efficiency gains in
- Food production
- Harvest and storage
- Food processing
- Food distribution
- Consumption
- Diet and nutrition choices
Oh my, and I thought a 50 cent loaf of bread was a problem.
However, the history of food prices over time 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.
Unless the growth is not locked in.
What sustainably FED suggests…
We are concerned that so few people know how critical food security is for the global future.
The general decline in food prices over time, thanks to fossil fuel inputs, production innovations, and global supply chains reaching every potential market, has lulled us into a false sense of food security. Complacency is especially true for the lucky ones in developed economies.
The reality is that prices over time will not continue to decline.
Both the absolute amount and the proportional spend on food will rise as the fossil fuel pulse wanes, soils degrade, and food production becomes more unstable from climate and geopolitical drivers.
It will be severe in some places and for the more vulnerable people.
The upside is that people are imaginative, innovative and courageous. Throw a challenge at a human, and she will take it on most of the time. There are solutions, and people can bend their minds to find them.
What the fortunate can do is become aware and prepare.
Have a browse around sustainably FED who knows where it might take you
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