eli5: How come things like whole wheat flower and brown rice cost more than their processed counterparts?

Question

It seem really backwards that foods that are processed more cost less. What are the reasons for this?

In: Economics

Answer 1

The demand for processed food is higher than the demand for non-processed food. When demand is high, supply must increase, or else the price increases. So food processors create machines and optimized processes that provide an economy of scale — it costs less, **per bag**, to create one *million* bags of processed flour than to create one *hundred* bags of unprocessed flour that requires an entirely separate production line.

Say you had one million grandmas baking cookies. Each cookie would be cheap, right?

But then over in one corner, you have *one* grandma handing out cookie dough. You haven’t even baked the cookies yet, so how can that cookie dough be more expensive than a fully baked cookie? Well, it’s because you have one million grandmas, just cranking them out.