Few Americans are privileged enough not to have been affected by food price inflation. For most of us, the unexpected rise in food prices during the 1970’s brought with it unwelcome changes in our budget as well as our diet.

The government was quick with explanations and solutions. The most interesting came from the Undersecretary of Agriculture who claimed that if food prices were too high, “the housewife would back out of the marketplace and the cost would go down.” As Jim Hightower noted, however, “he offered no insight into how one backs out of the market for food and lives to tell about it.”1

Down (And Out) On The Farm

With food prices soaring, it seems logical that farmers must be living high off the hog. During the 1970’s, prices farmers received for their products increased and 1973, in particular, was a good year for most farmers. But costs of production and living expenses for farmers climbed even higher, leaving many relatively worse off than before. Farms continued to go under. Between 1969 and 1974, 30,667 farms in Tennessee and Alabama, went out of business.2 Today, many farmers are forced to seek off-farm employment. The average farm family makes more than 40% of its income this way.3 Even so, the average farm family’s income in Tennessee and Alabama is thousands of dollars below the national average family income.4 Farm workers who do not own land are among the poorest of our country’s citizens. Only a fifth of them are even covered by minimum wage laws.5

Hard Times In The Boardrooms

To hear the corporate executives talk about it, even they have not been able to cash in on rising food prices. Big labor, they say, is the villain behind the price tags. Huff and puff as they might, Business Week found that in 1973 food industry workers won wage increases of only 6% while up in the boardrooms, executives of the big food processing corporations increased their own salaries by 18% and supermarket executives boosted theirs by 24%.6 We consumers picked up the tab at the checkout counter. In 1974, the U.S. Department of Agriculture reported that only 6% of the rise in food prices in the past twenty years was attributable to the farmer — 94% resulted from costs added by the corporate middlemen.7

One reason they are able to get away with it is the tight grip on the food industry held by a handful of corporations. There are 32,000 food processors in the country, a highly competitive situation at first glance. Competition, however, is somewhat less than intense. Twenty-four of the 32,000 make 57% of all sales.8

Once you consider any given product line, the competition nearly disappears. The Federal Trade Commission (FTC) considers monopolistic elements to be present anytime 40% or more of a market for an item is controlled by only four corporations. In this setting, competition takes the backseat to corporate coziness. As far back as 1966, four corporations controlled 40% of the meat packing sales, 60% of fluid milk sales, 90% of soft drink sales, half of the sales on bread and related products, and 40% of all canned fruit and vegetable sales. According to a study made by the FTC in 1972, monopoly power in these five food industries alone resulted in overcharges to consumers of $1,323,900,000.9

The Chain Gang

Ever since modern chain supermarkets got their start with the Piggly Wiggly stores in Memphis around 1912,10 their share of local food sales has grown. Here again, as few as four corporations have come to dominate retail food sales in most cities, resulting in timid competition and an atmosphere ripe for price gouging. The accompanying chart, published last spring by the Joint Economic Committee of Congress, shows what percentage of the local market is controlled by four supermarkets in selected North Carolina cities. If as much as 40% of the sales in your area is garnered by four companies, chances are you are paying too much for your groceries. In this situation, the supermarkets have the power to set prices artificially high — higher than they would be in a competitive market system. FTC studies have shown that the higher the degree of concentrated corporate power, the higher the profit rates.

Consumers foot the bill for the supermarket monopolies. And what a bill! A 1975 government report found that 41% of the increase in food margins in a nine-year period was the result of rising advertising and promotional expenses11 — money spent not to better our diet but to manipulate us as shoppers.

If You’d Like To Beat The High Cost Of Eating:
  • Cut back on processed foods — you pay for the processing.
  • Buy private label products — national brand names cost 20% more.12 You’re paying for TV commercials and higher profits, not added quality.
  • Support direct farm-to-consumer food marketing networks — you’ll get better, cheaper food while striking a blow against economic concentration. You and area farmers will both benefit.
  • Organize your friends and neighbors into a food-buying club. Buy in bulk and pocket the savings.
  • Find out more about our food and agriculture system. Join other people in helping create a system that serves everyone’s needs.
  • Oppose food monopolies — concentrated economic power spells trouble for consumers and family farmers through higher prices and manipulation of supplies.

— Cary was assisted by Sara Fowler and Alice Ammerman.

Who’s Cashing In?

Wage hikes are commonly cited as contributing to inflation. Hard pressed to explain the big jumps in food costs, some industry executives tried to pin the blame on the American worker. As you can see, it was a case of the pot calling the kettle black.

Supermarket Chief Executive’s
1976 Earnings		 % Increase Since 1970
A&P $381,000 up 147%
Kroger $303,000 up 90%
Safeway $275,000 up 77%
Average U.S. Wage Earner $9,167 up 48%
Monopoly Power In Your City?

The Federal Trade Commission estimates that elements of monopoly are often present when 40% or more of a market is controlled by four or fewer companies. Monopoly control in the food retailing business can mean higher prices and lower quality. How does your city stand? Has monopoly power grown since 1954?

% Of Grocery Store Sales Made By Four Companies

City 1954 1972
Asheville, N.C. n.a. 72.8%
Burlington, N.C. n.a. 54.8%
Charlotte/Gastonia, N.C. 50.1% 48.6%
Greensboro/High Point/
Winston Salem, N.C.		 n.a. 36.5%
Raleigh/Durham, N.C. 47.9% 63.5%
Wilmington, N.C. n.a. 52.3%

(n.a. — not available)

Source: “The Profit and Price Performance of Leading Food Chains, 1970-74,” A Study prepared for the use of the Joint Economic Committee, Congress of the United States, March 1977.

  1. Eat Your Heart Out: How Food Profiteers Victimize the Consumer, by Jim Hightower. Crown Publishers, NY: 1975, p. 44.
  2. “Fewer Farms Produce More” by Gene D. Sullivan and Cheryl Odom in “Economic Review,” Federal Reserve Bank of Atlanta, May/June 1977, p. 76.
  3. Farm Income Situation, USDA, July 1974, Table 5-D, p. 71.
  4. See State Farm Income Statistics, USDA, Sept., 1975.
  5. “The Conditions of Farmworkers and Small Farmers” by James Pierce, National Sharecroppers Fund and “The Hired Farm Working Force of 1972,” USDA.
  6. “Executive Compensation: Getting Richer in ’73,” “Business Week,” May 4, 1974, p. 58.
  7. “Farm Prices Fall While Marketing Margins Rise,” USDA, Office of Communication, June 24, 1974.
  8. “Analysis of the 25,000 Leading U.S. Corporations” by the editors of “News Front,” 1971.
  9. Hightower, 1975, p. 64-65.
  10. The Supermarket: An Analysis of Growth, Development and Change by Rom J. Markin, Washington State University Press, 1968, p. 9.
  11. “Profits Advance for Food Chains,” New York Times, July 12, 1975, as quoted in The American Food Scandal by William Robbins.
  12. American Journal of Agricultural Economics, Vol. 57, No. 2, May 1975, p. 200.