The Upside of High Food Prices

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Reading time: 4 – 7 minutes

As the price at the gas pump continues to climb, so does the cost of diary, grain and meat products. Why? Because increasing fuel prices make it more expensive to grow, harvest, transport, process and package food. Indeed, food costs rose by 4 percent in 2007, the highest annual increase since 1990 [1]. In 2008, the U.S. Department of Agriculture predicts the consumer price index for all food will increase 4.5 to 5.5 percent as retailers continue to pass on fuel costs to consumers [1].

There is, however, an upside to the increasing cost of food. Michael Pollan, author of the book In Defense of Food: An Eater’s Manifesto, argues that as the price of fuel and commodities rise, nutritionally questionable, high-profit ingredients like high-fructose corn syrup will also cost more [2]. And as prices rise, consumer demand for products containing such ingredients will fall.

This is good news for producers of sustainable foods — locally grown produce and locally raised meat — that don’t rely on fossil fuels. Locally grown foods are fresher, better tasting and healthier than food that’s been shipped or flown in from further away (we won’t even discuss heavily processed foods). Sustainable food producers haven’t felt the increasing cost of fuel like factory farms, making them more economically competitive in today’s marketplace. Even so, a recent Ohio State University study found that grocery store shoppers are willing to spend more for locally grown foods [3].

photo credit: alykat

The study was published in the May issue of the American Journal of Agricultural Economics. Researchers evaluated data from 477 surveys at 17 Midwestern locations, including retail grocery stores, on-site farm markets and farmers markets. In the survey, shoppers were presented with two baskets of strawberries under 80 different combinations of price, freshness, farm location and farm type. After presenting the options, shoppers were asked which basket of strawberries they would buy. The average retail shopper was willing to pay 48 cents more for strawberries produced locally (in the study, local meant grown within Ohio). Shoppers at farm markets were willing to pay even more at 92 cents extra. Freshness was also found to be important factor for shoppers. Retail shoppers were willing to pay 54 cents more for fresh produce that was recently harvested. Again, farm market shoppers were willing to pay even more at 73 cents extra.

According to Marvin Batte, Ph.D., a co-author of the study and professor of Agricultural, Environmental and Development Economics at Ohio State University [4]:

Statistically, we sorted out what explains each person choosing one basket over the other. We were able to determine how important price was, how important where the strawberries were produced was and whether the freshness guarantee was a factor. Basically what made the biggest difference was local production.

The Washington Post ran a great story earlier this week about the benefits of fruit and vegetables. To Produce Good Health, Bite Into Fruit and Veggies reveals some of the reasons why these food provide so many health benefits. The article also suggests that fresh fruits and vegetables are inexpensive and more accessible over the summer months:

Scientists are just beginning to fully understand the power of produce. And the start of summer provides a great opportunity to expand your nutritional horizons by sampling the foods that will come into peak season during the coming months. Seasonal fruit and vegetables cost less than produce available at other times of year, so they can help stretch your food dollars.

Nobody likes to pay more for food. But if increased food costs force people to find locally grown alternatives and eat healthier, there is indeed an upside to the high price of food. For more information on farmers markets, family farms and other sources of sustainably grown food in your area where you can buy locally grown produce and grass-fed meats, visit LocalHarvest.org.

What are your concerns about the cost of food? How are you dealing with increasing food prices?