While there are currently spikes in food prices on the world markets, it seems relevant to zoom in for a close-up on food prices in terms of consumer choice. This will allow an understanding as to what these prices actually consist of or, more to the point, what it costs to produce the food that consumers pay for. Opinions as to whether food is too cheap or too expensive diverge. However, looking at current food systems whereby the conventional industrial model is the main approach used to supply supermarkets is this, at the same time, having devastating impacts on the environment and rural livelihoods. The question therefore arises – is the price too high?
It is no secret that as consumers we seek to pay as little as possible for goods and services while expecting to get the maximum benefit from our purchase. What if the apparent benefit we obtain is tiny compared to what we, humankind, lose when we pay that price?
There are impacts that are not accounted for in the transaction, the so-called “externalities” which are the costs triggered by a producer but which are not financially incurred by that producer. In simple terms, the producer does not pay for polluting water and air (despite a polluter pays principle existing in some countries), for causing soil infertility, or for producing nutrient-poor and chemically contaminated food that creates considerable risks to consumers’ health. It is the consumer who subsequently indirectly absorbs all these costs.
“Agriculture brings myriad positive and negative externalities, that is, costs or benefits that are externalized to third parties. Examples of negative externalities include the pollution of water bodies from nitrate leaching and human health impacts, such as pesticide poisoning. On the other hand, positive externalities from farming, such as community cohesion and the maintenance of livelihoods for smallholder farmers, are often undervalued. Some of these benefits simply do not get included in economic decision-making. We need to account for positive and negative externalities otherwise we are not paying the true cost for our food,” says Salman Hussain, the coordinator of a six-year-old initiative from the United Nations Environment Programme (UNEP) called the Economics of Ecosystems and Biodiversity (TEEB) for Agriculture and Food.
Socialising the costs through externalities
The real cost of food today needs to be thoroughly examined, especially when it comes to food that provides no information to the consumer about its producer and the way it was produced. On the one hand, economy of scale and modernization in agriculture allow high yields (in the short-term) and a decrease in marginal costs, thereby lowering the price of produce. However, on the other hand, this system has a profound impact on the environment, rural livelihoods, and ultimately on the consumers themselves – something that the supermarkets do not tell their customers about. Yet, the existing evidence indicates that this information is of vital importance as, at the end of the day, we might be paying much more than we think we are:
“Food is getting cheaper and we think it is good for all. This is a myth. Food is not cheap. We forget the cost to the environment and to our health. We actually pay many times for our food; the first one in the shop, the second one when we, in many countries, pay taxes that subsidize farmers, the third time when we pay for cleaning up the environment, and the fourth time when we treat our diseases,” says Angela Hilmi in her book Agricultural transition – a different logic.
The Sustainable Food Trust provides a range of examples of how big these costs can be. One of these shows the direct link between the intensification of agriculture and the rapid rise of several human diseases e.g., allergies, cardiovascular diseases, some cancers, and obesity. The latter, for instance, costs approximately US$2 trillion annually to the global economy, and in the United States alone it could be “equivalent to 20% of total spending”. Another example is nitrogen, one of the main fertilizers used in modern conventional agriculture:
“The European Nitrogen Assessment has estimated that collectively, the costs of nitrogen-related damage range is as high as €320 billion, or up to €750 per person every year throughout the EU, about two-thirds of which relates to agriculture. Although intensive farmers get somewhere in the region of a three-fold return for the money they spend on nitrogen fertilizer, because it is not taxed and its production in some countries is even subsidized, the true cost to society is estimated to be up to three times greater still.”
Ways to know the real cost
There are different ways to understand what the real cost and hence the price of food is. For instance, there are several tools that can help international organizations, governments, and businesses to account for the negative costs of conventional systems but also for the benefits of healthy diets and the biodiversity of alternative agricultural approaches and systems. One of these is the TEEBAgriFood Evaluation Framework: Overarching Implementation Guidance commissioned by the Global Alliance for the Future of Food and developed by the Institute for the Development of Environmental-Economic Accounting – IDEEA Group with the support of the United Nations Environment Programme (UNEP). The TEEBAgriFood initiative was launched in 2015 and
“aimed to create a universal, inclusive, and comprehensive framework and a common language to describe the range of diverse and complex food and agriculture systems coherently and comparably across spatial scales (national, regional, farm), accounting for the negative and positive externalities of these systems.”
This and other tools such as TCA Rapid Assessment for Investors and the Tool for Agroecology Performance Evaluation, TAPE (a holistic farm and community-level assessment approach launched by the Food and Agriculture Organization), respond to the needs of consumers and at the same time represent ‘multi-capital “true cost” accounting frameworks’ that can provide a roadmap to action. Furthermore, with the help of these frameworks and instruments, consumers might have the chance to finally start making informed decisions and buy food that actually brings them the highest possible benefits.
