While these figures are cited in current dollars, the story is similar when they are adjusted for inflation. Between 1990 and 1999, marketing costs rose 14 percent, while consumer food expenditures climbed 8 percent in real dollar terms. Meanwhile, the farm value of food purchases dropped 11 percent.
 
Most mainstream analysts have attributed this to shifting tastes and patterns of demand, reflecting not only Engels Curve type changes but also changing work participation rates of women. Thus, consumers bought a larger volume of food, value-added processing and packaging of at-home foods increased, spending at restaurants and fast food outlets grew, and prices for marketing inputs rose. A changing workforce — comprising more working women and more two-income households — meant that busy consumers of the 1990's demanded quick, easy-to-prepare convenience foods. The strong economy of the late 1990's raised incomes and allowed more consumers to pay for highly processed convenience foods.
 
It is typically suggested that all of these factors were the dominant contributors to the jump in food spending during the 1990's. Certainly, they played a role, but there were other important changes in production organisation which were probably even more significant. This is discussed in more detail below, after a look at the detailed trends.
 
A look at the more disaggregated data shows that this broad tendency of divergence between farm values and retail prices is evident in all the major food subsectors. Charts 2-9 show the index numbers of constant price trends of retail and values received by farmers for a wide range of food subsectors. These charts are very instructive.
 
Consider the case of meat products, shown in Chart 2. Until the mid-1980s, not only did the two indices move together, but farm value changes tended to be more than retail prices. From 1986 onwards, that pattern has been reversed. And from 1990, farm values have been declining quite sharply even as retail prices have continued to rise. By the late 1990s, the gap between the two was enormous.

Chart 2 >> Click to Enlarge

Chart 3 >> Click to Enlarge

Chart 4 >> Click to Enlarge
 
Very similar trends are evident for poultry (Chart 3) and for dairy products (Chart 4), the only difference being that in the 1990s in these two subsectors farm values do not decline as in meat products, but remain broadly stagnant. Similarly for fresh fruits (Chart 6) and fresh vegetables (Chart 7). However, the point about the latter two is that there is less scope for further and further processing in these, and therefore the discrepancy between retail price and farm value may be more reflective of increases in marketing margins rather than actual changes in the degree of processing.

Chart 5 >> Click to Enlarge

Chart 6 >> Click to Enlarge

Chart 7 >> Click to Enlarge