Want Food to Be More Affordable? Support Fair Competition that Would Bring Down Prices

Food is the second largest household budget for Americans, behind paying for rent or mortgage. With the rising cost of food, millions of Americans are feeling the pinch and hurting financially. Hawaii residents are feeling extra financial strain and pressure as our cost of food remains the highest in the nation.

On average we are paying well over $2,500 more annually than Massachusetts, the state with the second highest grocery prices, and a whopping $6,000 more annually than Kentucky, the state with the least expensive food prices. A family of four in Hawaii can expect to spend an estimated annual food cost average of $14,042 in 2022.

We’ve all heard of the typical drivers of today’s rising food costs that have led to an 11% spike from the previous year. Certain food items have risen by larger percentages, e.g. pork cost 14% more than a year ago and beef up by 20%.  First fuel was cited as a primary reason for the hikes. Fuel prices have gone down; but food prices haven’t. Then there are other explanations — pandemic, bottleneck food supply chains, supply-demand, labor turnover, war and energy price hikes, China’s slow recovery – all of them potentially legitimate contributors to rising food prices. Some are more true than others.

We’ve also been told that it would take time, no one knows how long, before food prices will stabilize and perhaps go down. Then there are other economists who believe today’s food prices will remain at current levels.

Industry Consolidation/Market Concentration
Besides those typical market drivers drilled into the minds of consumers – that gives the impression that nothing can be done and that the situation is just the free market playing out —  there is a deeper structural problem as to why food prices are at their current levels. What?

Industry consolidation or market concentration of the food industry. There’s simply not enough competition in the food production industry to bring about competitive prices.

In every part of the food production process from the farm to packing there is monopolization (some call it oligopolistic). Any serious economist knows of the increasing market concentration of the food industry. The data is there that shows monopolization exists.

Alarming stats
Some startling stats: four firms control 85% of all beef, 66% of all pork, and 54% of all poultry. And these megacompanies are spending millions in lobbying ($175 million spent during the 2020 election cycle alone) fighting against anti-trust bills and to protect their interests. Today, the top four corporations control more than 60% of the U.S. market for coffee, cookies, beer, and bread. In beef processing, baby food, pasta, and soda the top four companies control more than 80% of the U.S. market. 93% of the sodas we drink are owned by just three companies; and 73% of all cereals are also owned by three companies.

What a lack of competition means
Higher levels of concentration give businesses more power to set prices and increase the likelihood of price-fixing or market manipulation.

“It’s a system designed to funnel money into the hands of corporate shareholders and executives while exploiting farmers and workers and deceiving consumers about choice, abundance and efficiency,” said Amanda Starbuck, policy analyst at Food & Water Watch.

There is the illusion of choice with many brands for food items, but they’re essentially owned by at times one or two companies.

Specific to today’s environment of skyrocketing food costs, while some of the known and common drivers could in fact be partial legitimate reasons to raise prices, the question must be asked how is it then that these mega monopolistic companies are raking in record profits. A recent report by Oxfam International has found that 62 new “food billionaires” were created during the pandemic. Food and agribusiness billionaires reportedly raised their collective wealth by 42% in the past two years.

The Biden Administration allege foul play and argue that industry consolidation, especially in meat processing, helps a handful of corporations profit off inflation expectations by raising prices even further.

Act on
The Federal Trade Commission requested that Walmart, Kroger, Kraft, and Tyson, among others, hand over information in an investigation into price hikes and food shortages. The Biden administration rolled out a plan to boost meatpacking competition. Last year President Biden signed an Executive Order on Promoting Competition in the American Economy.

But we all know executive actions could be overturned by the next president and real sweeping reforms must be taken by Congress in order for policy to stick. But bills banning new mega-mergers and factory farms lack bipartisan support.

Congress needs to look into antitrust enforcement and needs to bring back merger standards that deem market concentration past a certain point to be harmful. Clearly, this is the case for today’s exorbitant food prices. There needs to be stronger fair competition rules to level the playing field.  This would challenge the current structure in the food industry and give opportunities for new competition to enter the market.

Let’s remember the obvious: food is a basic necessity and it cannot and should not reach a point to where a few mega monopolies and billionaires are excessively profiting at the expense of marginalized and middle-class families, and particularly seniors ability to put a basic meal on the table.