Is parity pricing enough? A critical analysis of parity pricing and the case for additional strategies

Abstract

Producers in the U.S., particularly small-scale farmers and specialty crop growers, are unable to maintain their livelihoods with farming alone. This issue is convoluted by low farm gate prices stemming from the unequal distribution of market share and political support within the U.S. food supply chain. As a result, many farm activists and scholars have recommended a revitalization of parity pricing within U.S. policy. Parity pricing once served to set price floors considered to represent “fair” farm gate prices determined by the farm gate price and purchasing power of commodities during the parity period of 1910–1914. In this paper, we evaluate whether parity did exist during the set period of 1910–1914, showing farm incomes and non-farm incomes were not significantly different from one another during the parity period. We then explore the extent to which parity prices correspond to farm-gate prices, transfer terminal prices, and retail prices for a select group of twelve specialty crops. We show that farm gate prices are significantly lower than parity prices, do not necessarily translate into low prices for consumers, and do not consistently correlate with production costs. Lastly, we display the temporal correspondence between the end of parity pricing and declines in farm income. Our analysis contributes important evidence of the inequalities within production, payment, and pricing structures of specialty crops in the U.S. As such, we provide a critique of parity pricing arguing that parity pricing alone will not be sufficient to solve the complex and deeply rooted issues underpinning low farm gate prices and injustices within the U.S. food system. We conclude with a discussion of the impacts of low farm gate prices and areas for policy interventions.