Food price mechanisms: How does the food system pay for its true cost transformation?

Annual Conference 2022 session 3 summary

Sunday, Apr 17, 2022

Máximo Torero Cullen, Chief Economist, Food and Agriculture Organization of the United Nations (FAO), in the first keynote address of the session described the real price of food as a fair price that reflects all assets used in food production. “It is a social price that exposes the harmful effects of child labour and prevents heritage being lost and it is a price that can help a consumer to choose more healthy options,” he explained. Today, however, no unified standard or method exists, while measuring values across different dimensions requires much information and many assumptions.

Adopting a true cost approach will improve understanding of how to use inputs more efficiently and minimise externalities. It is of benefit to governments, investors, producers and consumers, identifying the real cost of inputs on the environment and the impact of the policies needed to create transformation of the agri-food system – a concept wider than food production alone.

Pavan Sukhdev, Founder and CEO, GIST Impact, in the second keynote address, joining from Mumbai, maintained that existing food systems are broken in many ways. He cited analysis showing that “our diets have become the number one risk factor for global disease” and the human food system accounts for around half of all greenhouse gas emissions. He forecast change is coming as food systems are revaluated and “the huge externalities along the food chain have to be acknowledged, measured, valued and managed”. In pressing for change, emphasis must be placed on the benefits for people and health.

Mr Sukhdev said it is possible to comprehensively measure food systems. This holistic approach covers not just profit per hectare, but uses a template to assess entire food systems, measuring flows, and valuing outcomes and impacts, such as changes in natural, human and social capital.

During the panel session, Julia Riss, Head of Brussels Office, Rewe Group, described how her company had applied true cost accounting in a one-off experiment to the price of some of its staple products. It displayed these alongside the actual price charged, prompting considerable public and media interest. “Our message was to create transparency and show our consumption has an impact,” she said. She highlighted how the company is working with NGOs to improve biodiversity performance and reduce true costs. It supports farmers by paying them a premium for products on the way to being fully organic. This benefits consumers (more choice), the company (secure future organic produce) and farmers (rewards for their efforts).

Session 2 blog

Poppy Eyre, Innovation Support Officer at SusMetro for FoodSHIFT 2030, explained the manifesto ten young people had created in the FutureFoodMakers programme 2021. Their six-point Menu for Change included true cost accounting. This may not be reality today, but she predicted: “My generation will definitely be seeing this.”

The 23-year old urged young people to think systemically and challenge the status quo and appealed to those in senior positions to help them. A radical shift in our economic systems is necessary and this will involve risk. “Diving into the unknown is a scary thing to do, but I think it is our only option.”

Cliona Howie del Río, CEO, Foundation Earth, stressed that true cost accounting must be science-based with data that are credible, transparent and drive change. Her organisation is developing an independent food and drink label. This brings “asset and value to the whole value chain all the way down to farmers, giving merit where merit is due”. An environmental scientist with 25 years’ experience, she emphasised: “We need to change the way we produce and cultivate food to give people better options.” This requires a holistic and systemic approach, involves education and awareness and requires all the levers of change to be triggered simultaneously.

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