We have learnt a lot from the 2007/8 food price spike, but the future will be a bumpy ride says GFS Champion Tim Benton.
The historical era of falling food prices is over. Global demand for food is continuing to increase while production growth has slowed in recent years, leading to significant upward pressure on prices.
It is well recognised that world’s biological and ecological resources (its ’natural capital‘) provides ecosystem services that subsidise production costs: think about how soil fertility, promoted by soil biodiversity, pollination, natural pest control and the climate support agricultural production. Fully investing in sustaining the natural capital, via management of soils, biodiversity, water and carbon emissions would raise food production costs and add to prices.
Analysis by TruCost indicates that, on average, incorporating the environmental costs into retail prices would increase the price of a block of cheese by 18% higher; breakfast cereal should be 16% more expensive and fruit juice 6% more. If the world does, eventually, move towards a low carbon economy, the prices of carbon-intensive foods such as beef are likely to rise disproportionately.
If the ‘natural capital’ of production were taken into account, food would cost much more. Image: donebythehandsofabrokenartist
It is possible to speculate that some foods may be more prone to price rises than others. For example, foods where demand really outstrips supply (perhaps due to limited geographical ranges of production, such as cocoa, or where there is an acknowledged high environmental cost of production, such as beef cattle. The assumptions underlying economic models predicting food prices are often based on ‘business as usual’ – in a rapidly changing world of extremes, business may not be as usual, and adapting the food system to reflect this may have an untoward impact on prices.
Given that a significant contribution to price rises is driven through choice-driven demand (e.g. western levels of meat consumption, especially of red meat, is a cultural choice rather than a nutritional need), one way of meeting the challenge of increasing demand is to reduce it by changing our diets. The question about how we can ‘budge or nudge’ demand in the direction of sustainable and healthy diets is much contested; one answer is that as demand grows and supply can’t keep up, then prices will increase – which may drive behaviour towards reducing demand through waste management and eating differently.
The real cost
Clearly, price is a potent driver of demand and behavioural change in general. Perhaps partly in response to food price inflation, we waste significantly less food now than several years ago. Analysis of purchases following the 2007/8 food price spike show a complex pattern of changes in response to food price increases as prices increased UK households did indeed buy less – 4.2% less – but paying 12% more.
People also traded down to save money by buying cheaper alternatives. But the worst impact was on the poorest 10%: when you have already traded down to save money, there ain’t much scope for doing anything but buying less (and so eating less) or paying more (or both), and so the poorest spent 17% more in 2011 than in 2007. (And if the average family’s food bill increased 12%, and the poorest’s increased by 17%, this means relatively the poorest had to find almost half as much again (17/12=1.4x) to feed themselves.)
People tend to eat less nutritional, lower quality food when they are poorer. Image: Chris Lim on Flickr
In addition, there is a significant increase in obesity as people get poorer. A recent intriguing hypothesis from the evolutionary nutritionist Steve Simpson suggests that we may have ‘separate appetites’ for protein and calories. This implies that if we eat a low protein diet we are more likely to carry on consuming empty calories to assuage the protein appetite.
Analysis of a range of foods indicates that protein contents increase with price: thus budget diets are often of low protein density which may stimulate excess consumption. Without tackling dietary composition, increasing prices are likely to be detrimental to nutrition for many.
Increasing food prices may have a silver lining in terms of reducing demand growth: reducing over consumption and waste is good for both us and the environment. The westernised diet may be globally aspirational, but even if it were attainable (which I doubt), it wouldn’t be sustainable. The World Wildlife Fund’s 2012 Living Planet report suggests that “if everyone lived like an average resident of the USA, a total of four earths would be required to generate humanity’s annual demand on nature”.
We’ve only got one world: somehow we have to find the means to match demand to the ability to supply sustainably. And in a way that doesn’t mean only the rich win.
About Tim Benton
Tim Benton is GFS Champion and an interdisciplinary researcher working on issues around agriculture-environment interactions. Formerly, he was Research Dean in the Faculty of Biological Sciences, University of Leeds, and Chair of the Africa College Partnership, an interdisciplinary virtual research institute concerned with sustainable agriculture in sub-Saharan Africa. He has worked on the links between farming and biodiversity (and ecosystem services) for many years.