Wednesday, November 20, 2013

Why does food cost so much outside the US?

Many people who come to Finland complain about how expensive things are here (except for Norwegians - apparently it is literally unbelievable how much everything costs in Norway).  This is especially obvious in the supermarkets where, with the $/€ exchange rate, food seems about 1.5x as expensive as in the US (though I have not actually done a price comparison).  This reminded me of some conversations I had with a good friend back in college about how the US spends by far the least of any country on food, so I was curious 1) what Finland's overall spending on food is, and 2) why it is different than the USA.

What Finland (and other countries) spend on food
The first question is much easier to answer, so I will start there.  I found the awesome map below on the interesting food blog Civil Eats.  If you go to the map in the post itself, you can click on each country and it will give you more detailed financial information on that country (and also the country name, if you are geographically challenged).
Map of country spending on food.  Check it out at its source, on Civil Eats

For the lazy - Americans spend $2200 (6.9% of their household budget) on food; Finns spend $2800 (11.9% of their budget).

WHY?
Like the good scientist I am trying to be, I came up with a bunch of hypotheses to explain this difference, then tried to find some data to support/refute them.  Hint: It is actually a little of everything, because nothing is ever due to just one reason.

Hypothesis 1: Finland imports more of its food, which is expensive
This is probably everyone's gut reaction because Finland is so far north that growing things is difficult.  But surprisingly, those data [1] say that Finns eat $125 of imported food per person per year, while Americans eat $60.  That is only $60 of the $600 difference in spending.  Where is the other $540?

Hypothesis 2: Americans consume less food
Nope.  According to estimates I found, each American purchases 953 kg/year [2] while each Finn purchases ~600 kg/year [3].

Or, if you prefer to look at calories, Americans eat 2700 calories per day (purchase 3750 [4] but waste 29% [5]), which interestingly is roughly the same as Finns (3200 purchased [4] but only 15% wasted [6]).

Hypothesis 3: Food in the USA is cheaper
A quick internet search of food prices reveals that groceries are 19% cheaper in the USA.  But we just saw that Americans buy 60% more food by weight.  So, while prices are clearly a factor, Americans somehow still manage to buy way more food at slightly lower prices and end up paying slightly less overall.  And they purchase more calories as well, so why are the calories that Americans purchase cheaper?

Hypothesis 4: Americans eat more low-cost calories (aka SUGAR)
What is a cheap calorie?  This blog has an excellent collection of what the (American) price per calorie is for a variety of common foods.  Perhaps unsurprisingly, most of the cheapest ones are various types of sugar and simple starch, which are known to not be the healthiest of foods.

So do Americans eat more sugar and starch?  A very recent report on sugar consumption in various countries that shows the USA has the highest sugar consumption [7] of the countries studied.  Full data on sugar consumption can be found at gapminder.org (search under 'Data' for 'sugar'), and shows that Finland's sugar consumption falls far behind the US.  However, calculating the exact contribution of sugar consumption to the price difference is challenging.

EDIT: See Comments for another excellent addition (Americans pay for their food through tax subsidies, so grocery store prices are basically fake) from my friend Christin Boggs, who keeps an amazing blog about food, complete with awesome pictures!

Summary for the lazy reader: Americans buy (and waste) more food and overall pay less than Finns to do so.  This is partially because each food item is slightly cheaper in the US, but also because the American diet consists of more cheap, sugar-based calories.  EDIT: And American taxes go to subsidies on certain foods.

Okay, so there are some things that cost more just because they are imported...

Things I cited that are not linked above:
[1] Ng, F., & Aksoy, M. A. (2008, January). Who Are the Net Food Importing Countries?
[2] USDA ERS. (2012, 05 20). US Department of Agriculture Economic Research Service. Retrieved 10 28, 2013, from Import Share of Consumption: http://www.ers.usda.gov/topics/international-markets-trade/us-agricultural-trade/import-share-of-consumption.aspx
[3] SILVENNOINEN, K., KATAJAJUURI, J. M., HARTIKAINEN, H., JALKANEN, L., KOIVUPURO, H., & REINIKAINEN, A. (2012). FOOD WASTE VOLUME AND COMPOSITION IN THE FINNISH SUPPLY CHAIN: SPECIAL FOCUS ON FOOD SERVICE SECTOR. Proceedings Venice 2012, Fourth International Symposium on Energy from Biomass and Waste. Italy: CISA.
[4] Food and Agriculture Organization of the United Nations. (n.d.). FAO . Retrieved 10 28, 2013, from Food Consumption Nutrients: http://www.fao.org/fileadmin/templates/ess/documents/food_security_statistics/FoodConsumptionNutrients_en.xls
[5] Research Program on Climate Change, Agriculture, and Food Security. (n.d.). Research Program on Climate Change, Agriculture, and Food Security. Retrieved 10 28, 2013, from Food Waste: http://ccafs.cgiar.org/bigfacts/food-waste/
[6] Agrifood Research Finland MTT. (n.d.). MTT. Retrieved 10 28, 2013, from Almost 400 million kilos wasted in the Finnish food production chain: https://portal.mtt.fi/portal/page/portal/mtt_en/mtt/news/pressreleases/2012/Almost%20400%20million%20kilos%20wasted%20in%20the%20Finnish%20food%20production%20chain
[7] Credit Suisse Research Institute. (2013, 09). Sugar Consumption at a Crossroads. Retrieved 10 29, 2013, from https://doc.research-and-analytics.csfb.com/docView?language=ENG&source=ulg&format=PDF&document_id=1022457401&serialid=atRE31ByPkIjEXa/p3AyptOvIGdxTK833tLZ1E7AwlQ=






3 comments:

  1. Interesting and insightful topic! I would like to add to your 4th hypothesis and say that American food actually costs much more than the amount showing up on a grocery store receipt. One of the big factors contributing to the supposed low cost of American food is the amount of tax dollars (about $5 billion per year) that are funneled into corn and soy production by large-scale farms. These plants are turned into cheap, fast and processed foods containing artificial ingredients, which are causing significant health problems. At the moment, small-scale farmers that produce healthy organic whole foods in a sustainable fashion do not receive subsidies and thus an organic diet requires additional spending. However, proponents of the slow food movement argue that this type of shopping is a long-term investment, as the consumption of whole foods will promote good health, fewer doctor’s visits, and have a positive impact on the environment. I’m not sure though how this compares to the Finnish food system, except to say that an organic product in the Finnish supermarket is more expensive than its conventional counterpart.

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  2. Thanks for the excellent comment - something important I had overlooked! I made a few edits at the end there. I wonder if it would be possible to figure out individual food spending including those hidden costs. Do you think it is possible to just divide that $5 billion by the population? Because that only comes out to $15 per person, but I bet it is more complicated than that.

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  3. Interesting post Alistair. I haven't found the food costs to be as bad as I expected here. I've found it interesting which items seem close to prices I'm used to, and which things are much more expensive (for example, beef is WAY more expensive here than in Colombia, especially in comparison to chicken, but pasta costs close to the same price)

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