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Is The Era of Cheap Food Over?

Is The Era of Cheap Food Over?. James Dunn Pennsylvania State University. Introduction. Has food been cheap? Why? Was it a conscious plan? Why is it more expensive now? Is this temporary or permanent? Why?. Source: Economic Report of the President. Source: USDA.

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Is The Era of Cheap Food Over?

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  1. Is The Era of Cheap Food Over? James Dunn Pennsylvania State University

  2. Introduction • Has food been cheap? • Why? • Was it a conscious plan? • Why is it more expensive now? • Is this temporary or permanent? • Why?

  3. Source: Economic Report of the President

  4. Source: USDA

  5. Source: Bureau of LaborStatistics

  6. Food away from home continues to increase in importance Source: USDA

  7. Has Food Been Cheap? • Real incomes have risen, but food prices have been steady • Real farm prices are down • Some products (chicken, milk) are cheaper • We have decreased portion of spending on food while eating more further processed food and more meals away from home

  8. Why is food cheaper? • Technological advances, especially at farm level • Educated and innovative farmers • Business climate

  9. Source:USDA

  10. Chicken Production Efficiency Source: National Chicken Council

  11. K: - 32-36% P: - 25-29% N: - 6-8%

  12. Educated and Innovative Farmers • Formal education • Extension, farm publications, other training • Amish farmers with 30,000 lbs. of milk/cow • Horse-drawn no-till planters • The number of farms drops steadily • Those operating today survived against tough competition

  13. Business climate • Relatively easy to expand • Few government restrictions on what farmer can do • Relatively low taxes • Available credit at reasonable rates • Innovative input businesses

  14. Was this a Conscious Plan? • No • Land-grant system designed to advance agriculture • Goal not cheap food, but progress • Cheap food the inevitable result

  15. Why is food more expensive now? • China, India, and ethanol • China and India demanding more of everything • Fuel • Fertilizer • Feed • Concrete • Steel • Ethanol from corn pushed up corn prices and everything else

  16. Is this temporary or permanent? • Will prosperity in India and China continue to grow? • Will production keep up with population growth? • Can third world afford to pay? • Will bio-fuels splurge end?

  17. Will incomes in India and China continue to grow? • Big markets 2.5 bil. people • Lots of very poor people – poor are multiplying fastest – especially in India • Low wages • Agriculture advancing rapidly • Are there jobs in cities if people leave countryside? • Government pretty corrupt

  18. Will production keep up with world population growth? • 6.8 bil. February 2010, 1.17% in growth in 2008 • Africa – about 1 bil. – very poor, AIDS, wars, bad government –Zimbabwe • Latin America 570 mil. – very poor, bad government • Asia – 4 bil. – mostly poor, bad government • Europe – 730 mil. and losing population • North America – 440 mil. slow growth • Dean McPheron says 50% more people by 2050

  19. Agriculture • Productivity growing faster than population • Productivity growth spreading worldwide • Coelli and Rao estimate world annual growth in agricultural productivity from 1980 to 2000 to be “2.1% , with efficiency change (or catch-up) contributing 0.9% per year and technical change providing the other 1.2%. (p. 133)” • Food should be able to keep up • Four Horsemen of the Apocalypse – kill population off – disease, war, famine, pestilence

  20. Can third world afford to pay? • No, probably not • Fastest growth in poorest countries • Generally countries with worst governments – Myanmar! • Doubling of food prices increases the share of food in income from 10% to 10.6% in rich countries- from 50% to 61% in poor countries (Ron Trostle, Economic Research Service, USDA)

  21. Will bio-fuels splurge end? • It already would have without the subsidies • Realizing that you can’t get something for nothing must eventually become obvious • The ethanol industry is really struggling • Bio-diesel is also • Cellulosic is not coming along fast • Where will the feedstocks be grown

  22. Bio-Diesel production(mil. gal.) Source: National Biodiesel Board

  23. Will real food prices fall again? • Yes! • Newer seeds – stacked genetics – 7 stack • More investment – fertilizer plants, etc. • Less bio-fuels • Agriculture responds pretty fast • Consumers adjust • “I have infinite confidence in the ability of the American farmer to overproduce”

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