Why hasn't innovation in the agricultural industry led to a significant reduction in food prices?

Question

There has been a lot of innovation in the agricultural industry. GMO, giant silos, factory farming, machinery, etc.
But if we look at actual food prices since 1960 food actually got more expensive. So why hasn't the innovation led to a drop in food prices?

Answer 1

Why hasn't innovation in the agricultural industry led to a significant reduction in food prices?

Mostly (present couple of years excluded) this is because of inflation. Inflation means money loses value. A dollar today does not have the same value as a dollar in 1900. The same holds for almost every currency around the world.

More recently, real food prices also increased due to Covid19 supply chain disruptions and the Russo-Ukrainian war.

Furthermore, your claim:

But if we look at actual food prices since 1960 food actually got more expensive.

is not very accurate. First you only show food prices for wheat, not for all food. Second, food did not actually became more expensive over time, but cheaper over time (excluding a recent few years for which I was not able to find good data source for historic comparison, and likely Covid19 and the current Russo-Ukrainian war will affect real price of food).

As you can see below real food prices dropped over time (even though there was an increasing trend recently). What happened is that food got cheaper thanks to productivity increases, but money lost its value faster than food got cheaper. As a result value of food in terms of US dollars or Euro rose, but value of food in real terms got cheaper.

Overall real food price index around the world from Polaski (2008):

US real food price index for all food and home-cooked food from Christian and Rashad 2007:

Recently, there was increasing trend in real food prices, just anecdotally at conferences you could see a lot of papers worrying about high food prices impact on development. This was due to Covid19 lockdowns supply chain disruptions and the Russo-Ukrainian war. However, I was unable to find any source that would have recent real price index that would allow comparing today's prices with prices in 1900s or 1950s. Supply chain disruptions decrease overall productivity (e.g. value created divided by inputs), and the Russo-Ukrainian war just means that most of the world cannot (or put restrictions on accessing) access food production of large food producers, namely Russia and Ukraine.

Answer 2

The data in 1muflon1's answer of the inflation adjusted food prices seems implausible: The perceived difference to me is much greater, anecdotally, than the <20% reduction the data shows for food consumed at home. My mother in law, in Texas, stretched the Tuna for sandwiches for her children, and my family in Germany was typically eating pork, not beef, and even that not often, because beef was too expensive. These are not concerns for us today, so food is much cheaper in perception.

There are several factors that may explain the perceived implausibility:

• We are much richer. While Christian's and Rashad's chart is inflation adjusted it doesn't reflect the rise in real income during this period. The median family today in the U.S. is about twice as rich than in the 1950s. In other places of the world the income gain was much larger. The fraction of our income taken up by food is much lower than in the 1950s, around 40%. This is corroborated for staple food by this chart from Our World in Data.

• Rising incomes combined with shrinking food prices have a non-linear impact into the economic well-being of an individual or a family. Lower incomes are used up mostly for indispensable expenses, the primary needs. There is little disposable income. There is no money to buy more food; rising prices pose an existential crisis. When incomes rise and food prices fall, basically every additional dollar is newly disposable income: Money that was locked in is now available to make choices, including choices concerning better or more delicious food.

• We eat better food. "Better" as in higher quality, greater variety and higher sophistication. In Germany in the 1970s we just didn't have Balsamico vinegar, Zucchini or antipasti on our daily menus. They were not available in normal stores. Today, many out-of-season fruit are available year-round, made possible by climate controlled storage and air transport. We drink wine from all over the world. That's obviously more expensive than eating mainly seasonal vegetables in winter, making preserves from excess fruit in summer, and drinking local beer, as was customary in the 1950s.

• We eat more processed food. I suppose that the data from Christian and Rashad simply looks at food expenditures and not at a specific food selection that's constant over time. In this case their data will reflect the trend to processed, ready-made and hence more expensive food. There is a documentary about the Jewish tradition of gefilte fish across three generations. The grandma describes how she manually prepares the dish, starting with a live fish; her granddaughter just opens a jar with gefilte fish balls:

One of the main reasons why I have to take gefilte fish out of a jar is: My lifestyle is so different from that of my grandmother's and my mom's that it's really a necessity.

Answer 3

In my other answer I listed reasons why food appears cheaper than it nominally is. But the fact that the prices didn't drop more despite of huge advances in mechanization still puzzled me. Here is a take:

The mechanization in the agricultural sector is an answer to the rising cost of labor. It is not necessarily much cheaper than labor in 1955; it is much cheaper than labor today though. Places with cheap labor continue to use it and do not pursue mechanization; that is true for migrant or illegal harvest helpers in the U.S. just as for many places in the developing world.

As an example take the current (spring 2022) situation in California as reported by the New York Times (emphasis by me). The article starts with the (perhaps surprising) fact that the number of illegal immigrants in the U.S. is shrinking, and that the number of undocumented farm hands declined even faster. This has an impact on the agricultural production in California, where illegal immigrants from Mexico used to do a substantial fraction of the labor on farms:

Immigrant guest workers are unlikely to fill the labor hole on America’s farms, though. For starters, they are costlier than the largely unauthorized workers they are replacing. The adverse effect wage rate in California this year is \$17.51, well above the \$15 minimum wage that farmers must pay workers hired locally.

So farmers are also looking elsewhere. “We are living on borrowed time,” said Dave Puglia, president and chief executive of Western Growers, the lobby group for farmers in the West. “I want half the produce harvest mechanized in 10 years. There’s no other solution.”

Mechanical harvest is not cheaper than manual harvest using cheap labor (I should add: by exploiting illegal immigrants) a couple years ago. Therefore, the generated produce is not cheaper than in the past — it is cheaper though than it would be if it were harvested with the more expensive labor today.

Answer 4

Because most of the big innovations in most crops had already happened

The major technological advances for arable crops in industrial-scale farming are:-

• Productivity per plant
• Reliability of germination
• Large-scale irrigation
• Automation of ploughing/planting/harvesting/threshing
• Weedkillers
• Pesticides
• Artificial fertilisers

For staple crops such as wheat, all of these innovations had already happened by 1960 and were already very mature technologies. Have there been improvements since then? Sure there have. Have any of them been order-of-magnitude game-changers? Not at all - they're only attempting to improve slightly on something which is already extremely highly optimised.