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Why are refined foods cheaper?

edgarallanho Jun 6, 2010 08:46 PM

So white flour is cheaper than whole wheat flour and white sugar is cheaper than raw sugar. Why? Wouldn't it technically cost more to process the ingredients down so much? Or is it simply a quality issue, where sugar that isn't fit to be raw sugar (is this possible?) or similar is just processed until it's acceptable?

Enlighten me!

  1. ipsedixit Jun 6, 2010 08:56 PM

    Economies of scale.

    3 Replies
    1. re: ipsedixit
      Popkin Jun 6, 2010 09:08 PM

      Can you clarify?

      For example:
      I still see it as just skipping a step (say, bleaching) while still sending out an equal amount of product. Is it somehow cheaper to make 1 ton of white sugar and ship it out than it is to process and send out 1 ton of (semi)raw sugar?

      Of course, I suppose if demand is higher for white sugar than raw, say 5 tons of white sugar for every 1 ton in raw, it might result in a lower price for the slightly more processed product (the "economy of scale").

      1. re: Popkin
        ipsedixit Jun 6, 2010 09:56 PM

        It's a simple issue of demand.

        There is a simple fixed cost (e.g. factories and equipment) that is required to make an unrefined product or a refined product. Those costs are fixed. Generally, you're going to need to buy a (lets call it) a "Sugar Widget" for X dollars no matter if you are making 1 ton of sugar or 10 tons of sugar. (Of course, if you plan on making 1000 tons of sugar, you might then invest in another Sugar Widget, but that's another issue for another post on another board ...)

        Demand is generally higher for white sugar, which means a sugar manufacturer can therefore spread its fixed costs amongst more buyers/consumers. Demand (by comparison) for raw sugar is lower, which means a raw sugar manufacturer can spread its fixed costs amongst less buyers/consumers.

        Now, you may ask why demand for white sugar is higher than that for raw sugar. That's probably a more interesting question. Maybe it's cultural, or maybe there are culinary reasons for it (such as it's easier for baking, for example), or maybe it's based on consumer preferences. Dunno.

        1. re: ipsedixit
          johnb Jun 8, 2010 07:39 PM

          You are correct that it is an issue of demand, but in my view there are two flaws in the specifics of your reasoning: (1) the same people who make white sugar are the ones who make other grades/types. I doubt there is a material cost difference at the production level. If there is a cost difference for the delivered product it is due to stocking and handling the smaller quantities of the lower-volume specialty item, but I doubt even that explains the retail spread--it's probably on the order of a penny or two a pound. (2) you assume price is determined by cost, which is a common fallacy. In reality, prices for most things are determined by what the market for that thing will bear, which in turn is determined by competition and other factors. In this case, the buyers of the specialty item, the "raw" sugar, are less price sensitive, and so the price that can be and is charged is higher.

    2. WhatThePho Jun 8, 2010 05:21 PM

      Part of it is essentially the issue of quality too, as you asked. Why is high fructose corn syrup used in so many processed foods instead of sugar? The type of corn used for that syrup is unfit for eating in any other manner. In the U.S. this type of corn is also subsidized because, without getting too political, the group of people it benefits have a lot of pull. So the final product is really very inexpensive, when compared to cane sugar. We would likely eat differently in America if vegetable farmers received subsidies.

      1 Reply
      1. re: WhatThePho
        johnb Jun 8, 2010 07:09 PM

        The corn used for HFCS is basically similar and costs much the same as that fed to animals, which is what most corn is used for. HFCS is generally more expensive than world market sugar. The reason it has been so widely adopted is that sugar in the US is so expensive due to sugar import quotas that keep world market sugar out. Were it not for the quotas, the US would, like the rest of the world, not have gone to HFCS as it did.

      2. visciole Jun 8, 2010 06:36 PM

        Subsidies are a large part of it, too.

        1. junescook Jun 8, 2010 07:15 PM

          Does anybody know someone who works for one of the large conglomomorates that could explain to us what is really going on?

          1 Reply
          1. re: junescook
            applehome Jun 9, 2010 07:52 AM

            Do you not believe that it's mainly a matter of the marketplace and public policy (subsidies and tariffs), as everybody has been explaining? What magic bullet answer do you expect the corporations to give you?

            Johnb is absolutely correct - the price of making the product has very little to do with the cost of it in the marketplace. This is especially true with commodities, where the price of manufacture is low and essentially the same for everybody.

          2. Miss Needle Jun 10, 2010 10:19 AM

            In addition to what has been mentioned above, refined foods generally have a longer shelf life than its less refined counterparts.

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