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Food is everybody's business
By James D. Ritchie
We all eat; most of us do it every day. But deciding what to eat and where to eat it seems to have become one of the more burdensome choices many people make.
Prepare an at-home meal from scratch, or carry in something from the deli? Eat out at a sit-down restaurant, or cruise the drive-thru window at the burger place? Should we choose conventional, whole foods, organic, natural or whatever is cheapest? Oriental, Italian or Tex-Mex? How did a simple thing like feeding our faces get to be so complicated?
“Part of the complexity comes from the abundance of choices we have,” said Tammy Roberts, University of Missouri nutrition and health education specialist. “According to USDA’s Economic Research Service, the median number of items stocked by supermarkets today is about 37,000, compared with only 13,000 in 1980. And in that same quarter-century, we’ve seen a big growth in food service establishments.”
This diversity of choice is a recent phenomenon—a marvel of modern agricultural production, product development and merchandising. A century ago, the wealthiest person on earth could not afford most of the food options we now take for granted.
However, food choice and the convenience that has grown up around it come at a price. Last year, food prices increased by 2.3 percent and are projected to rise by about that percentage in 2006, according to the U. S. Bureau of Labor Statistics. That’s well below the overall inflation rate (3.4 percent in 2005), which has been the case for most of the last two decades.
Food’s still a bargain
Despite the annual up-tick in food prices, in real terms (the portion of family income spent on food), U.S. food prices have steadily declined for the past half century. Farmers and ranchers know the story well, but it will stand repeating: food is among the better bargains Americans enjoy. In 2004 (the latest year for which figures are available), U.S. consumers’ food spending was only 9.5 cents out of each dollar of disposable income. For food consumed at home, shoppers spent 5.4 cents of each dollar of income. They spent 4.1 cents for food away from home.
While the cost of away-from-home food (as a share of income) has remained fairly constant over the past 50 years, the amount spent for food eaten at home has steadily dropped.
“A lot of families are still eating at least one meal a day at home,” said Roberts. “However, food preparation is a different proposition. We use more convenience items even in home-prepared foods, which means more cost.”
Rather than make spaghetti sauce out-and-out, today’s cook is more likely to open a jar of Prego or Ragu. But there are “socialization” benefits of families dining together, especially for younger children. Children who eat at least part of their meals at the family table are less likely to be grossly overweight.
Wherever they buy and eat it, American consumers spend less on food than do people in virtually all other countries, including citizens of other industrialized nations such as France (14.8 percent) and Italy (14.7 percent). Families in Malaysia spend a lot more (28.9 percent), as do people in India (39.7 percent) and the Philippines (47.5 percent).
But share of income spent for food says nothing about the superior quality and safety of American table fare. The late U.S. Congressman Jerry Litton, a Missouri Charolais breeder, used to make the comparison this way: “In America, the average consumer spends about 10 cents out of each dollar of income on food, and that dime buys a chicken that has been produced and processed under government inspection, washed, cut up, packaged and kept refrigerated until the shopper takes it out of the meat case.
“In most other countries of the world, consumers spend 50 cents out of each dollar on food, and that half-dollar buys a chicken that has been hanging by its neck all morning in an open-air market on a dusty street.”
Food is big business
In the latest year for which data is available, consumers spent $744.2 billion for food that originated on U.S. farms and ranches. However, only $140.2 billion of that (about 19 percent) found its way back to producers. The remaining $604 billion went to cover the expense of bringing food to consumers—labor, transportation, processing, packaging, storage, marketing, advertising—and includes the cost of restaurant-prepared meals.
If the consumer’s food dollar is the pie, the grower’s slice has steadily shrunk in the past several years. Generally, the amount of processing required between the farm and the retail store (or restaurant) dictates the farm value of a given commodity, and the closer production is to consumption, the bigger the slice of pie. For example, a family who owns a layer flock and sells eggs at the farm gets to keep all of the consumer’s dollar. By contrast, a wheat grower earns only five or six cents on his grain that goes into a one-pound loaf of bread.
It’s a worn canard, but for the most part, producers are price takers, rather than price setters. Although the marketing sector’s share of the food dollar exceeds the farm share by more than four to one, agricultural conditions can dictate retail price swings. Supplies—and prices—can change rapidly with changes in weather, international competition, the natural livestock growth and production cycles, and other factors.
However, these changes typically do not affect retail food prices right away. There’s usually a lag—sometimes of weeks or months—between the time farm cost changes occur until retail shelves reflect those changes. For instance, if something bad happens to the Florida orange crop that pushes prices upward, a week or more could go by before increases show up in oranges at stores in the mid-continent. It takes even longer for the price hike to hit processed orange juice. Retail bread prices may not reflect higher (or lower) wheat costs for several months.
The issue is health
There’s a new kind of food shopper today. In fact, there are several different kinds of shoppers, and more of them all the time are concerned about the safety and wholesomeness of the food they buy. They are savvier about the nutritional value of food in supermarkets and restaurants. They read labels and understand the difference between unsaturated fat and trans fat. And, increasingly, they want to know where their food comes from, how it is produced, who produced it and in what kind of production system.
“The underlying issue is health,” said Roberts. “Our population is growing older and people are more health conscious. That covers a lot of things, not just food.” As people get into their 50s and 60s, they begin to get a stronger whiff of their own mortality. This may not be the end of the road yet, but the end is more clearly in sight than it was 20 or 30 years earlier. Health concerns gain in importance, including healthful eating.
Another group of consumers, apparently much less concerned about health, is eating its way into an epidemic of obesity. Since 1990, obesity has doubled among adults and tripled among children. Today, health officials estimate that 61 percent of adults and 13 percent of children are seriously overweight or obese.
“Obesity is becoming a major preventable cause of health care problems,” said Tammy Roberts. “It’s especially serious for children, who are setting themselves up for chronic diseases such as diabetes, which will afflict them for the rest of their lives.”
Filling niches
The food-buying public is not a monolithic mass. There are vegetarians and meat eaters, people who diet to lose weight or bulk up, people with allergies or medical conditions that limit their choices, folks with ethnic or religious preferences in what they eat—all of which make definite niches among what we call the American consumer.
Some food producers find ways to capitalize on these diverse segments of consumers, and many of them are doing it through the established high-volume food industry. If there is one key to success in these ventures it, is uniform—and verifiable—quality standards. In the meat industry, among the more notable examples are Certified Angus Beef and Nebraska Corn Fed Beef, which are widely distributed through conventional food marketing outlets.
Or, take or-ganic foods. Once the pro-vince mainly of specialty stores and roadside markets, organic foods have made the mainstream food distribution system. Wal-Mart, now the nation’s largest food retailer, has added organic foods sections to the company’s Supercenters.
USDA has established production standards whereby foods can legally be labeled “organic.” The federal agency has delegated certification and compliance to state governments, many of which have handed off these functions to regional organic organizations. These organizations do not always sing off the same page, but the demand for organic foods has increased markedly—even while these foodstuffs usually come at a premium price.
“Organic foods are produced without herbicides or insecticides, which means they are more labor intensive,” said Roberts. “Also, fewer preservatives are used in processed organic foods, which often means they have a shorter shelf life. This adds to cost.”
Ten years ago, Diana and Gary Endicott began what grew into Good Natured Family Farms, an alliance of about 40 producers in southwest Missouri and southeastern Kansas.
“When our tomato crop out-produced our needs, I decided to find a place to sell the surplus,” recalled Diana. “Today, Good Natured Family Farms produces a wide range of foodstuffs, including beef, poultry and dairy products, plus we own and operate a federally inspected meat processing plant.”
Most of the Good Natured Family Farms production sells through Hen House Markets and Price Chopper, supermarket chains operated by Ball Corporation in the Kansas City area.
“We’ve been lucky,” she continued. “The people at Hen House Markets understood what we wanted to do and supported us. Today, our brand name appears on a variety of products that come from small family farms in the area.”
Bud Hansen raises nearly 2,000 goats each year, but he doesn’t own them long. On his farm just west of Grovespring, in Wright County, Mo., Hansen finishes goats to mesh with ethnic and religious observations.
“It’s a very seasonal market,” he said. “Peaks come around Muslim and Middle Eastern feast days. Last spring, the liveweight price of 50- to 60-pound finished goats got to $1.85 per pound, whereas the price during most of the year is nearer $1 per pound.”
But there’s a growing demand for goat meat, particularly among people of Arab, Eastern European and Hispanic extraction. Hansen believes he will have a market for some time to come.
Food marketing and distribution patterns have changed rapidly over the past few years. Two decades ago, who would have guessed that the top five packing companies would today be processing 80 percent of our beef, or that the nation’s largest discount store chain would become the No. 1 food retailer? Changes are still underway at a rapid pace. This spells challenges for food producers.
It also means opportunities, for those producers who can take advantage of change. But earning a bigger slice of the food-dollar pie involves more than an “if-we-grow-it, they-will-come” attitude.
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