Along the Food Chain with Michael Olson…
1099: Cheap Food Isn’t
Professor Marion Nestle, author of Soda Politics, &
Katy Keiffer, author of What’s the Matter with Meat
Why does the U.S. have such cheap food?
I once went looking for the reason big farms could out compete little farms in the competition for consumer dollars.
“That’s a no-brainer,” I was told. “It’s the economies of scale.”
“And what are those economies of scale? “ I asked.
“Well,” came the reply, “suppose you have a 1-acre farm and I have a 1,000 acre farm, and one day we both go to town and buy a $10,000 tractor. That tractor is going to cost you $10,000 per acre, but its only going to cost me $10 per acre. Now, which one of us do you think is going to produce cheaper food?”
Economies of scale come into play every time a dollar is spent on the cost of doing business. The more acres one has, the less the cost per acre is going to be. But there is one cost of doing business where economies of scale are particularly effective.
A couple of years ago I received a phone call from an attorney specializing in ag-related legal issues. “Did you receive the letter?” he asked.
“What letter?” I answered.
“The one that said, ‘If local agriculture is taking a bite out of your profits, join us in Washington, DC.” He said.
Let’s see: If I have a one-acre farm, and he has a 1,000 acre farm, and one day we need to go to Washington, DC and spend $10,000 to fly a congress person to a golf game in Tahiti, that flight will cost me $10,000 per acre, but it will only cost him $10 per acre. Guess who is flying whom to Tahiti?
Now, let’s ask ourselves: “What can government do to help business produce cheap food?”
Food Chain Radio & Forums #1,099: Cheap Food Isn’t (Tags: economies of scale, cheap food, externalized costing)