Corrupted taxes, hidden taxes, and the chicken boom

Posted on Friday, October 17th, 2008 at 12:46 pm by JTE

The US Department of Agriculture has a projected fiscal-year 2009 budget of $95 billion, out of which $1.1 billion is intended for “food safety” programs. The current US population is 305 million. That makes for an average (which really isn’t a good measure for this kind of thing, but is the handy one) of $311 of taxes, per person, going to the USDA as a whole, and a whopping $3.61 per person going towards “food safety.”

Do you feel safe?

Apparently, there are quite a few people who do not. In recent article in the Valley News (“What’s That Clucking Sound? Chicken Coops Are Popping Up All Over,” p. C1, 9/13/2008; link is to paper’s site, but the article is not available online) about explosive growth in interest in keeping some backyard chickens, William Craig writes

When I analyzed the chicken-farming urge that had me chatting up hatchery employees in Lonesome Dove, I didn’t diagnose it as an economic alarm bell. I was, I thought, thinking positive, imagining the unbeatable flavor of truly fresh eggs, the pleasure of serving my family pure, healthy food. But how “positive” is the knowledge that much of the food in our markets is distinctly, dangerously unhealthy? That awareness is a big part of the chicken boom, according to Jacques. People want “control over what’s in their food,” he says, and many are buying organic chicken feed. It “costs twice as much, but people are still doing it. … The satisfaction of knowing what’s in (the egg) is tremendous.”

So tremendous, in fact, that West Lebanon Supply has had to stop selling organically raised birds. Small suppliers can’t compete with the demands of big buyers such as the southern states’ Winn-Dixie grocery chain, which is charging as much as $6 for a dozen organic eggs.”

Woof!

I don’t buy many eggs—I’ve never much liked them—so I wasn’t sure how different that was from the cost of conventional eggs. Well, the most recent (September 15, 2008) organic poultry market report from the USDA lists large organic eggs as having a wholesale price between $2.65 and $3.00 per dozen. It also lists organic broiler chickens as wholesaling for between $2.01 and $2.14 per pound. (Data on lots of different organic “farmgate” and wholesale prices are here.)

At the same time, conventional eggs are wholesaling for a projected $1.50 to $1.56 per dozen and conventional broiler chickens for $0.78 to $0.79 per pound. (See the March 2008 report “Egg prices skyrocket”. These figures are for the first quarter of 2008, so be aware that the data sources are a little different between the organic and conventional. But it should be good for ballpark figuring.)

That makes a markup for organics—at the wholesale level—of something like 80% for eggs and 165% for the birds themselves. I’m not sure to what extent the retailers add an additional markup—I doubt they are reducing it at all. So let’s call that the minimum premium people are paying for eggs and chicken because they don’t trust that the conventional versions are good for themselves, their families, or the environment. This report from December 2006, “Organic Poultry and Eggs Capture High Price Premiums and Growing Share of Specialty Markets,” goes into it in more detail.

Similarly, the wholesale price premium for broccoli in June 2007 was over 200% and for carrots 124%.

Overall, the organic food market in the U.S. is now over $16 billion, and rising fast. If we assume that the average premium for organic food across all food types is 50%, that means we’ve paid an extra $5.33 billion for our organics, and that’s probably a conservative estimate for the average price premium. But that’s okay, better safe than sorry when it comes to pulling statistics out of your rear end.

Even if we go way conservative and say the premium people are paying is only a total of $2 billion each year, that’s double what the USDA spends on “food safety.” So treat that organic price premium like a hidden tax. If the USDA were doing its job, if it weren’t a bought-and-paid-for front for large-scale agribusiness, you wouldn’t have to worry about “conventional” food because it would be as safe and as healthy and as environmentally responsible as organics are now. You could buy the lower priced food and still feel pretty good, instead of fearful.

[Photo courtesy of protohiro]

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