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

The U.S. agricultural sector has experienced a widening gap between prices received by farmers at the farm gate and the prices required to cover labor, inputs, land tenure, and living costs. Consolidation in the food industry, high input costs, and policies that incentivize overproduction and low retail prices have produced an untenable economic environment, with median household income from farming negative for many small farms. Small farms constitute the vast majority of farms yet receive a small share of production value and limited subsidies; specialty crop producers are particularly affected and often ineligible for revenue-support programs. As farm product prices have fallen, non-farm income has increased, but many farm households still do not achieve a living wage. Against this backdrop, some scholars and activists call for re-implementing parity pricing, defined as farm gate prices that provide equivalent purchasing power to the 1910–1914 period—a time widely considered to reflect fair returns to farmers relative to inputs and living expenses. However, the assumption that parity pricing would remedy declining farm income lacks empirical support, and the social connotation of parity as fair wages does not align with current USDA parity price calculations. This study: (1) tests whether parity existed in the set period by comparing farm and non-farm incomes circa 1916; (2) presents a case study of twelve commonly marketed specialty crops to compare farm gate, terminal, retail, and parity prices; (3) examines production costs and their relationships to observed prices; and (4) explores temporal correspondence between the end of formal parity policy and declines in farm income. The goal is to critically assess whether parity pricing alone can address contemporary challenges and to identify additional policy and market strategies.

Parity pricing emerged in response to post–World War I agricultural price collapses, formalized in the Agricultural Adjustment Act (AAA) of 1933 to give commodities the same purchasing power as in 1910–1914. Initially, parity set price floors to cushion producers. The AAA of 1948 updated parity to include an Adjusted Base Price (ABP) and a Parity Index, allowing parity prices to vary with market conditions. Today, USDA continues to calculate and publish parity prices, but after full enactment of the 1948 provisions in 1954, parity no longer establishes universal price floors, instead informing limited price support policies and marketing orders for selected commodities. Under current definitions, parity price equals the product’s ABP multiplied by the Parity Index (and scaled by 100). ABP is based on a 10-year average of commodity prices adjusted by the ratio of overall farm prices in that period to the 1910–1914 base, with allowances for government payments and cash receipts. The Parity Index measures changes in prices for goods and services purchased by farmers, wages for hired labor, interest, and taxes relative to the 1910–1914 base. USDA notes parity indicates price relationships rather than farmer well-being, net income, or production costs; thus, contemporary parity should not be conflated with fair wages or profitability. Broader literature cited in the paper highlights persistent consolidation in the food supply chain, the shift away from parity-era supports, and ongoing debates over price supports, supply management, and alternative market structures. Prior work shows major commodities’ farm gate prices often sit far below parity benchmarks, reinforcing concerns about farmers’ purchasing power and income viability.

The study proceeded in three parts. 1) Historical parity test: To assess whether parity (income equality) existed during the parity period, the authors used 1916 IRS income data to compare farm household incomes with national household incomes using Kolmogorov–Smirnov and Wilcoxon signed-rank tests. A weak-ordered test examined differences in proportions among rank-ordered income groups. 2) Specialty crop price comparisons: Twelve commonly marketed specialty crops (e.g., apples, asparagus, green beans, broccoli, cabbage, carrots, sweet corn, cucumber, garlic, lettuce, bell peppers, tomatoes) were evaluated. The authors compiled farm gate prices (FGP), transfer terminal prices (TTP), retail prices (RP), and USDA-calculated parity prices (PP). Prices were standardized to hundredweight (cwt; 50.8 kg). Paired t-tests compared mean FGP, TTP, RP, and PP for each commodity. Reported summary tables and figures present mean prices and differences largely for 2014–2018, drawing from USDA NASS and AMS sources. The paper notes AMS “Terminal Market Report” weekly averages and “Retail Report” monthly averages were used; all prices were converted to cwt for comparability. Production cost estimates were compiled from extension and research sources to contextualize pricing relative to costs. 3) Farm income over time: To contextualize structural changes, the ratio of farm income to total household income for farm households was examined over time (1934–2021) using ERS data, illustrating long-run trends in self-sufficiency and reliance on off-farm income.

- Parity in the base period: The 1916 comparison of income distributions between farm households and the general population showed no statistically significant differences (p = 0.990), supporting the use of 1910–1914 as a parity period in terms of income equality. - Specialty crops, 2014–2018: For all twelve crops, mean farm gate prices (FGPs) were significantly lower than parity prices (PPs). The largest PP–FGP gaps occurred for tomatoes, green beans, asparagus, and cucumbers. FGPs were also lower than transfer terminal (TTP) and retail prices (RPs) for all commodities. - Retail vs parity: Most mean retail prices were significantly lower than parity prices; exceptions included sweet corn and bell peppers (not significantly different), and garlic and lettuce (RPs significantly higher than PP). - Terminal vs retail: TTPs were not consistently below RPs. For asparagus, broccoli, carrots, and garlic, RPs were significantly lower than TTPs, indicating that lower upstream prices do not necessarily yield lower consumer prices. TTPs were significantly lower than PPs for most crops, but not significantly different for broccoli, lettuce, and bell peppers; only garlic’s TTP exceeded its PP significantly. - Production costs: Higher production costs did not consistently align with higher FGPs or PPs. For instance, bell peppers and tomatoes are costly to produce yet were not among the top FGP commodities, while carrots, sweet corn, and cabbage generally showed lower costs and lower prices. - Farm income trends: Since the 1940s, the ratio of farm income to total household income for farm households has trended downward; over 2011–2021, farm income averaged about 21% of total household income, underscoring increased reliance on off-farm earnings.

The findings validate that parity, as income equality, existed in the early twentieth century, but contemporary farm returns are far below parity benchmarks across specialty crops. The observed disconnects—FGPs far below PPs, mixed relationships among TTP, RP, and PP, and weak correspondence between production costs and farm returns—indicate that low farm gate prices are not offset by consumer benefits nor explained by costs alone. This undermines the notion that parity pricing, as currently calculated, would be sufficient to restore farm self-sufficiency. Structural factors—industry concentration, contract farming, and unequal subsidy distribution—contribute to low farm gate prices and increased dependence on off-farm income. Minority and small-scale specialty crop producers are disproportionately affected due to limited eligibility for supports and systemic barriers to land, credit, and insurance coverage. Contracting and retail strategies (e.g., loss leaders) can perpetuate low farm returns without reducing consumer prices. While parity benchmarks remain higher than current FGPs (indicating erosion of farmers’ purchasing power), policy solutions likely require more than reinstating parity formulas. Evidence suggests that marketing orders, supply management, targeted price supports, and localized market strategies can improve returns and resilience, as demonstrated by examples like cranberries and Vidalia onions, and international cases (Canada’s supply management; New Zealand’s value-chain and policy shifts). Local and direct-to-retail channels can raise prices received and provide social benefits, though they are not universally accessible or sufficient and may entail issues of equity and scale.

Reinstating parity pricing could help, but on its own is unlikely to restore farmer self-sufficiency given contemporary living costs, debts, input prices, and market structures. Any use of parity should be updated to incorporate regional living wages, production costs, and farmer well-being. Broader policy shifts are needed to balance market power and protect small- and medium-scale producers, including price supports or floors, supply management, and expansion of equitable local and regional markets (e.g., DTC, direct-to-retail, food hubs). Programs that facilitate transitions, provide technical assistance, and support marketing orders and local certifications (e.g., PGS) can enhance producer returns. Future research should assess farmers’ perspectives on parity sufficiency and the effectiveness of combined policy-market strategies in improving incomes and resilience.

- Scope limited to twelve specialty crops; results are not representative of all specialty crops. - The analysis does not fully account for retailers that also act as wholesalers, which can result in retail prices below terminal prices due to direct large-volume purchasing. - Higher prices in farmers’ markets may depend on limited supply; scaling up could depress prices. - Transitions to alternative practices and markets require substantial upfront investments, training, and risk. - Data sources and timeframes differ across components (e.g., parity and price series vs retail/terminal datasets), which may introduce comparability constraints.