Record-High Food Prices? Or Just Better Than Record Lows?

Reporters and politicians are making frequent references to high food prices – some going so far as to suggest prices are nearing record levels. But for the farmers and peasants who produce the world’s food, prices are nowhere near record highs. In fact, what is currently happening to corn, beans, rice, or wheat prices would be more accurately characterized as a rapid rise up from record lows.

In the mid-1970s, Canadian corn prices reached $3 per bushel (Chatham, Ont.) and wheat topped $4.50 (Saskatoon, Sask.). Since then, inflation has taken its toll on the value of a dollar.

A new pickup truck no longer costs $5,500, as it did in the mid-’70s. In fact, according to Statistics Canada and its Consumer Price Index measure of inflation, you would need $4.50 today to have the same purchasing power you got from $1 in 1974.

INFLATION

Adjusted for inflation, mid- 1970s’ peak corn prices work out to more than $13 per bushel and wheat prices work out to nearly $23.

While recent prices of $7 per bushel for wheat and $6 for corn are welcome, they are half or a third of what might constitute a record high. Recent prices would not seem high at all had we not grown used to prices that have hovered near record lows.

The accompanying graph shows just how low prices have been in recent decades, and just how modest recent “spikes” actually are.

The take-home message is that recent price hikes are not unprecedented, and that current prices are nowhere near a record high.

None of the preceding, however, should be taken as a dismissal of the very real economic pain and physical hunger that recent price increases and those of 2007-08 have brought to low-income families in many parts of Africa, Asia, Central America, and around the world.

For those earning just a few dollars per day, a doubling of food prices hurts – indeed, at the extreme, it can kill. But the problem is not so much the price increases themselves – grain prices could not stay near record lows forever.

Rather, the problem is that over the past few decades we have moved hundreds of millions of peasants and farmers off the land and into growing mega-cities.

More than 3.5 billion people now live in cities: eight million people in Lima, Peru, nine million in Lagos, Nigeria, nearly 10 million in Karachi, Pakistan, 17 million in Cairo, 20 million in Manila. Government and corporate policies have expelled peasants from their lands, changing them from self-provisioning food producers into dependent urban food purchasers – maximizing their vulnerability to rising food costs.

BOTTOM THIRD

The preceding casts some light on why, despite farm gate prices that are well within the bottom third of their long-term range, many citizens in low-income countries have been hard-hit by relatively modest food price increases.

One further thing needs to be examined, however: reports that rising grain prices must necessarily lead to increases in retail food prices in Canada and other “rich nations” – so-called “food inflation.” The assertion that the price of cornflakes or bread must rise because corn and wheat prices are rising is simply a lie.

In 1974, bakeries and retailers were making and selling 40-cent loaves of bread made from $4-per-bushel wheat. One bushel of wheat makes 67 loaves of bread. Hence, the farmer’s share of a loaf was just over a nickel.

Today, baking companies and retailers are making and selling $2.63 loaves of bread made from $7-per-bushel wheat. The farmer’s share of that $2.63 loaf is about a dime (which, because of inflation is actually worth less than the nickel that she or he received in 1974).

Thus, the cost of the wheat in the bread is up five cents but the bread itself is up $2.23. Retailers and baking companies have passed on to consumers the five-cent extra cost of wheat, and another couple dollars besides. In light of this, it is laughable to say that the price of bread must now rise still further in order to cover rising wheat or flour costs.

A look at corn reveals the same pattern. In the mid-1970s, Kellogg’s made $1-per-kilo Corn Flakes from 12-cents-per-kilo corn. Today, Kellogg’s makes $6.22-per-kilo Corn Flakes from 24-cents-per-kilo corn. A kilo of corn is up 12 cents; but a kilo of cornflakes is up more than $5. With the dollars per item they’ve already added to retail prices, surely food processors and retailers can absorb price increases for corn, wheat, soybeans, and other grains and oilseeds that work out to a few cents.

GRAIN PRICES NOT TO BLAME

Whether the problem is food riots and growing hunger in poor nations or escalating retail food prices in rich nations, it is an error to assert that these problems stem from high or rapidly rising grain and oilseed prices. In reality, these problems stem from government and corporate policies that displace food producers from the land and make them into food purchasers in cities, from policies that enable ever-larger corporate agribusiness corporations to dominate our food system and reap virtually all the profits, and policies that enable food processors and retailers to crank up food prices to consumers.

Fortunemagazine consistently lists food processing near the very top of its lists of the most profitable economic sectors – ranking processors alongside oil and pharmaceutical companies. Upstream in the food system, powerful input makers, energy companies, and seed companies take equally large profits, seemingly intent on capturing every dime farmers make. The problem is not near-record high prices for farmers, it is near-record high profits for the few large corporate players that globally dominate the food system.

Terry Boehm is the president of the National Farmers Union,

and farms near Colonsay, Saskatchewan.

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