Is Cheap Food Really Good For America?

Source: USDA, Natural Resources Conservation Service 

Food is as cheap now as it's ever been. Is that a good thing? Today, I'll make the argument that without cheap food, our economy could never have flourished as it has over the past century.

Where once we spent over 20% of our disposable income on food for consumption at home, we now spend just under 6%. Shifts like that reverberate far beyond our food budgets, and create all sorts of positive benefits in other sectors of our economy.

Feeding a lot more mouths in America
As we talked about yesterday , advances in agricultural machinery, fertilizers, and genetically modified plants have made food shortages a thing of the past.

These three forces have combined to make farming far more efficient: in 1930, the average farmer could feed about 10 people. By 1990, one farmer's  work could feed ten-fold the number of people. When you consider the nation's population has grown from 123 million to 315 million since 1930, it's a good thing these technologies were in place -- otherwise, there's no way we could feed 315 million mouths.

A boon to the economy
But beyond improved access to food, there are several other economic benefits that come with readily available food. First and foremost, when we aren't spending such a large percentage of our income on food, there are lots of other places that we can spend it.

As The Atlantic's Derek Thompson showed in a 2012 article , the drastic difference in food spending allowed for other sectors of the economy to blossom.

Source: The Atlantic

First and foremost among those sectors was housing. If the Great Recession has taught us anything, it's that weakness in the housing sector can wreak havoc on our economy. As folks have been able to spend less and less money on food, they've been able to put that money toward building or buying a house that best meets their needs.

The other area that has undeniably benefited from this trend is the automotive industry. If we were still spending near a fifth of our money on food, there's no way that we could possibly afford to fork over such large portions of our paychecks every month to pay for a car or a truck.

But the economic benefits of cheaper food go beyond even these two areas. On a broader level, all of the cash freed up by cheaper food helps fund innovation. From 3-D printing to the newest biomedical breakthroughs, it's hard to imagine our populace having the time or resources to realize such accomplishments while having to constantly worry about food security.

The companies benefiting from this trend
At the turn of the century, companies making farming machinery were the biggest beneficiaries of the cheaper-food trend. After that came the fertilizer companies.

But even though these two will continue to be important players in the food field for decades to come, the companies that can promise plentiful food through genetic engineering now attract the most attention. No name is more synonymous with genetically modified organisms (GMOs) than Monsanto (NYSE: MON  ) , but DuPont (NYSE: DD  )  and Dow Chemical (NYSE: DOW  ) are also major players in the field.

By making GMO seeds in the laboratory that are resistant to herbicides and pesticides sprayed on plants, farmers hope to have the ability to realize outsized yields without having to worry about insects or bacteria ruining their crops.

These three players are hoping to quell fears over GMOs as well, having helpedto  fund a website -- www.GMOanswers.com -- that touts the process as safe and beneficial. They have also poured millions of dollars into the state of Washington to help influence voting on  the state's GMO labeling laws.

Though you'll see tomorrow that I don't actually believe cheap food is as great for America as I make it seem above, itdoes have some economically beneficial consequences that are undeniable

There's Just One Thing More Valuable Than Food

It may seem surprising, but I would argue that food isn't, in fact, our most valuable natural resource. It's not gold. Or even oil. But it's more valuable than both of them. Combined. And here's the crazy part: one emerging company already has the market cornered... and stands to make in-the-know investors boatloads of cash. We reveal all in our special 100% FREE report The 21st Century's Most Precious Natural Resource. Just click here for instant access!


Read/Post Comments (5) | Recommend This Article (6)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 19, 2013, at 5:25 PM, Lucy2007 wrote:

    Thanks for writing this article Brian. It is really important for people to be aware of this! I'd like to add to the argument and say that in New Zealand, food is not cheap (and neither is gas), so more of your income goes to food and gas and you have less for other products. I believe this leads to an increase in crime, in terms of people breaking into homes and cars.

  • Report this Comment On September 20, 2013, at 4:10 PM, captaintodzilla wrote:

    "If there isn't justice for the people let there be no peace for the government." Doing the same thing over and over is insane. Fix America First. Prioritize. Recycle America ,turn things around. The Government should fear the people, opposite of how it is now. the government should protect people and regulate corporations not protect corporations and regulate people. We need to Build a good foundation then rebuild. Reinstate common sense. Create Accountability and most of all treat our cancers greed , ignorance and self-entitlement. Our society runs the way it does because it is designed that way for the rich by the rich. There are many common sense simple ways to change things to make a better world to live in. Until we can prioritize correctly , have accountability , and worry about the American instead of the American dollar things will remain perverted. Anyone can find fault -- it's not a sign of anything other than moderate brain activity. It's much harder to offer creative criticism that actually improves the situation for everyone involved, UNITED we stand divided we fall...there is only one race the HUMAN RACE all the divisions of political parties and skin color have demoralized this country into a sewage plant of lying stealing ignorant greedy self-entitled hypocritical idiots the government has had too much money power and time with too little results actions speak louder than words.

  • Report this Comment On September 20, 2013, at 4:23 PM, nonzerosum wrote:

    You should mention that some of the food costs are externalized onto healthcare, which is 17.7% of GDP (and that begs the question of why your chart shows only ~5% spend on health - perhaps you ignore employer contributions to health plans??). Other externalities include environmental pollution (think cattle feedlots), soil erosion etc. GMO is accelerating but the FDA/USDA don't require long term studies on micro dosages: not on pesticides, not on herbicides, not on any GMO products, nothing! (Ask the bees about this). Some GMO may be safe, but others may turn out to be as brilliant an idea as feeding meat to cows, which, btw, was supported by the USDA/FDA, just like they support feeding corn to these animals today.

  • Report this Comment On September 20, 2013, at 5:27 PM, nomofunfun wrote:

    Nice article getting at the details and past the myths.

  • Report this Comment On September 20, 2013, at 5:31 PM, nomofunfun wrote:

    Monsanto, the company which inspired millions to march against it and its frankenfood products, will not be allowed in business much longer. Once MON has to pay some $7 Billion in settlements to Brazilian farmers and gets sued out of business for contaminating American wheat supply with franken-wheat, the real winner will be DuPont.

    DuPont is superior-managed, produces only wholesome, natural seeds, and has awesome Ag products to support its business. Hopefully, a MON shill doesn't continue the effort to smear DuPont. DuPont's record stands for itself and millions don't march against DuPont, like they do against MON!

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