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Tuesday, March 15, 2011

A New Look At The American "Food Dollar"

(This post was originally published at Red Green and Blue on 3/15/11.  For a list of all my blog posts click here).  Patrick Canning of  the Economic Research Service of the USDA just released a new report on food prices.  My friend, John, sent it to me knowing that I can never resist a new set of interesting data.  I made some graphs to try to unpack the story here.  The title of the report is "A Revised and Expanded Food Dollar Series: A better understanding of our food costs."  This is a new way to present the data and it allows for a more detailed analysis of how our food dollars are spent.The graph above shows that when you buy food for preparation at home, 18-20 cents of each dollar spent actually goes to the farm and that has been a relatively stable percentage from 1993-2008 (the period of the study).  If you look at a dollar spent away from home at a restaurant, currently only about 5 cents is going to the farm sector and that value dropped since 1993.    The data I plotted includes beverages (sodas, alcohol...).  If you just look at food without the beverages, the "at home" percentage in 2008 was 24.3% to the farm and the the "away from home" share was 4.6%.  In any case, this data shows why even in a period of high commodity prices, our food expense is only slightly increased.  If you feel that food costs are high, don't blame the farmer!

This new USDA-ERS analysis breaks out the components of the food dollar in a more logical way.  The graph above looks at just the food component (without beverages).  Not surprisingly, when we eat out, most of our money is going to the restaurant for labor, overhead etc.  The comparison is a little unfair because this study does not cover the grocery trip fuel, or the cost of running the refrigerator and stove for the "at home" meal.  The "at home" food dollar actually includes much food processing expense because much of the food we buy is processed or otherwise made easier to prepare (e.g. if you buy the frozen fries vs the bag of potatoes, the can of beans vs dry, the frozen complete dinner etc.  I think it is interesting how small the values are for packaging, transportation and energy in both the at home and away scenarios.

This last graph is a little confusing.  It is the percent change of each of the food dollar components looking at two different, three year windows.  A value of 100 means that the component didn't change as a relative part of the food dollar.  Values below 100 mean that the component has gotten smaller over time.  Values above 100 mean that the component has gotten larger over time.  Not surprisingly, the energy component has increased for both the "at home" and "away from home" food dollar.  Advertising is a small part of the food dollar, but it has grown quite a bit for restaurants and declined for grocery stores.  Legal and accounting costs, also small, have increased.  The proportion of the away from home food dollar going to farms or food processing have dropped.  Packaging and transportation have both become slightly smaller components of either food dollar.
I would encourage anyone interested in this information to download the reportbecause I've only scratched the surface here.  Lots of debates about our food system would be more useful if based on hard data like this.

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