Food Prices, Expenditures, 

 and Income 



Robert L. Christensen and Donald R. Marion 



Department of Resource EconomicSy University of Massachusetts 



Have consumer expenditures for food been 

 increasing or decreasing, and if so, by how 

 much? What happens to the consumer's food 

 dollar; what share do farmers get, and how 

 much is absorbed by firms involved in the mar- 

 keting process? What determines how the con- 

 sumer food dollar is divided, and do those who 

 receive the largest part of consumer expendi- 

 tures have the largest profits, or vice-versa? 



These questions are among those most fre- 

 quently asked about the U.S. food system. A 

 recent U.S.D.A. publication (Dunham, D. 1993. 

 Food Costs ... From Farm to Retail in 1992. 

 Economic Research Service, USDA, Agricul- 

 tural Information Bulletin Number 669) con- 

 tains many of the answers, plus some additional 

 insights into issues such as recent changes in 

 food prices, consumer food expenditures, and 

 the farmers' share. The following discussion 

 addresses the above questions and some other 

 highhghts from that publication. 



Food Prices and Expenditures 



Changes in consumer prices, including food 

 prices, are measvired by the Consumer Price 

 Index (CPI) which, in turn, is used as the mea- 

 sure of inflation or changes in the cost of Uving. 

 In 1991 and 1992, food prices increased less 

 than the rate of inflation — the prices of aU. 

 consumer goods. In other words, the modest 

 increase in food prices helped to moderate the 

 overall rate of inflation. For 1991 and 1992, the 

 CPI rose by 4.2 and 3.0 percent, respec 

 tively, while food prices rose by only 2.9 and 1.2 

 percent, respectively. 



During the same two years, total consumer 

 expenditures for food increased slightly more 

 (3.6 and 2.3 percent, respectively) reflecting the 

 combined effects of food price increases, popula- 

 tion increases, and possible changes in con- 



sumption patterns. 



In 1991, U.S. consumers spent a total of 

 $492 bilhon for food, which amounts to $4,367 

 annually per household of 2.6 persons, or $1,680 

 per person per year, $37.30 per week, and $4.60 

 per day. Of that total, 62 percent was spent for 

 food consumed at home and 38 percent away 

 from home. 



Consumer Expenditures and Income 



For all consumers combined, 1992 food ex- 

 penditures represented 11.4 percent of personal 

 disposable income, though that percentage var- 

 ied widely with variations in income levels. 

 Households with disposable income of $5,000 to 

 $9,999 spent 32.6 percent of their income for 

 food, while those whose incomes were $30,000 to 

 $39,999 spent only 15.2 percent for food. At 

 higher income levels, even smaller proportions 

 were spent for food. 



The share of consumer disposable income 

 spent for food has, in general, been declining 

 since 1960, when consumers spent 17.5 percent 

 of disposable income for food. In 1970, that 

 percentage had declined to 13.9 percent, in 1980 

 to 13.5 percent, and 11.7 percent in 1990. Food 

 consumed at home has been the major factor in 

 that decline. In fact, consumer spending for food 

 eaten away from home rose from 3.5 percent of 

 personal disposable income in 1960to 4.4 per- 

 cent in 1980, and has fallen sUghtly to 4.2 

 percent in 1992. Why? The answer is that prices 

 for food away from home have risen more than 

 the prices of food consumed at home and that, 

 year by year, we have been eating an increasing 

 share of our meals away from home, a trend that 

 has slowed somewhat in recent years. 



The fact that food expenditures in total have 

 been declining as a percentage of income is a 

 result of incomes increasing more rapidly than 



14 



Fruit Notes, Fall, 1993 



