Introduction
If the consumer buys food directly from a farmer, it is likely that the price will be based on the farmers' costs of production plus the margin that the farmer requires for re-investment and an income for living. But in the developed world, the cost of food includes much more than simply the farmers' costs of production. Producing food also involves processing, storage, distribution, packaging and retailing. These processes all add substantial costs to the price of food that the consumer has to pay as well. Thus, in developed countries, where most food is processed by a third party and very little is sold directly by the farmer for consumption, the price of food is commonly much higher (by a factor of two or three times) than the production costs (Spedding, 1996).There are lots of examples which highlight how much more is involved in the cost of producing food than just the farmers' costs. During the last twenty years, the price of corn paid to the farmer has remained stable at around $0.15 per kilogram; the price in any given year has gone up or down, but on average has stayed steady. The price of a box of corn flakes, however, has continued to rise in price, increasing from around $2.00 per kilogram and advancing past $4.00 and on the way to $5.00 during that period. The farmers share of each food dollar spent at the grocery store dropped from 8¢ to less than 4¢. The same happened to the farmers' share of a dollar with wheat in crackers and beef in hamburgers: the price to consumers has gone up, yet the farmers' share has diminished proportionately or, as in the case of dairy products, the price the farmer receives has not risen at the same rate as that charged in the grocery store.
The cost of producing food is closely related to the amount of energy used during the primary production of the food and all the subsequent processes such as processing or packaging. In Québec, energy consumption in the agri-food sector represents about 11% of the total consumption of energy in the province. Primary agricultural production consumes 28% of this energy, while processing and packaging consumes 22%, storage 18 %, and distribution and preparation of food, 32 % (website of the Ministère de l'Agriculture, des Pêcheries et de l'alimentation du Québec). Other costs associated with the production of food are labour, equipment and marketing.
The energy needed in various food production systems that grow crops or raise livestock is discussed extensively in the "Energy Use" section. The present section will focus on the costs related to food processing, packaging, storage, distribution and retailing.
Index | Food Processing