Flash back to 1950.
Mom was in the kitchen, making three square meals a day from scratch.
And when she went to the grocery store, farmers got more than 40 percent of the money she spent on food.
Now, fast-forward to 1997.
Mom puts in a 40-hour week at the office. Families eat on the run. In this fast-paced, wired world, convenience is key.
This radical social change is the main reason why farmers today get just over 20 percent of the money people spend on food, said Dave Schweikhardt, agricultural economist at Michigan State University.
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Consumers are paying other people to prepare their food for them. And ever-increasing labor costs are the main reason for the widening spread between farm prices and retail prices.
“They’re not buying flour, eggs and milk,” Schweikhardt said.
“By and large, they’re buying prepared food, convenience food. It’s inevitable that’s going to drive the farmer’s share down.”
In the United States, about 45 percent of the money consumers spend on food goes to food they eat outside the home.
Canadian consumers lag, spending about 35 percent of their food dollar in restaurants in 1997, but the trend is the same.
Add a growing proportion of people who eschew the nuclear family and stay single, plus a buoyant economy, and the trend becomes more pronounced.
In 1975, labor costs accounted for 43 percent, or $48.3 billion (U.S.) of the total post-farmgate costs for marketing food in the U.S.
In 1997, labor accounted for close to half of the total costs – $216.2 billion. Canadian statistics are not available.
“These are industries that have had very slow growth in their labor productivity,” Schweikhardt said.
While fast-food restaurants have found some ways to cut labor costs, demand for prepared food has outstripped productivity improvements.
Packaging prepared foods costs money.
Advertising costs have also increased over the decades.
Farmers may be surprised to find they have something in common with the sectors that take the lions’ share of the food dollar.
“It is a narrow-margin, very high-volume industry,”said Schweikhardt, noting processors and retailers have a greater ability to pass on cost increases to the consumer.
Statistics Canada reports the food wholesale/retail sector showed net profit margins of 0.78 percent between 1988 and 1996.
The food service sector had an average 1.41 percent net profit margin during the same period, while the food manufacturing sector had a 2.02 percent profit margin.
Schweikhardt knows farmers fume about the widening gap between farmers’ prices and consumer food prices.
But he said the shrinking share of the food dollar has little to do with the profitability of farms.
He said even if farmers’ returns did increase, their share of the food dollar would still go down because of the overall trend toward further processing.
