Food For Thought: Why Are Groceries So Expensive?
Like everyone else, I keep reading about the worldwide food crisis and the recent rise in food prices in the United States, but it wasn’t until recently that it occurred to me what a huge impact it’s having on my wallet. And mind you, I’m single without any little tykes to feed.
Imagine what a family with a whole soccer team of children to feed must be going through.
Over the last few Sunday’s (my shopping day), I’ve noticed I can’t seem to pass through the checkout line without coughing up around $100, easily $20-$25 more than I normally pay.
The first few times, I thought I must have been tossing a few extras in my shopping cart that I don’t normally buy.
The problem is: I’m a regimented shopper; I buy the same items week after week. So it hit me like a tidal wave, recently, how the food crisis has really hit home.
Over the past year in the United States, food prices have shot up about 5 percent, more than double from the previous 10 year rate. Currently, annual food price inflation is running at 3 percent; the highest since the 1990's when it stood at 5.8 percent, according to Mike Walden, economist in the Department of Agricultural and Resource Economics of North Carolina State University..
Peter Timmer, meanwhile, Senior Fellow at the Center for Global Development, USA, said the last time the United States witnessed such a dramatic increase in food prices was in 1973-74, when there was a worldwide food crisis; and before that during the 1951 Korean War commodity boom.
Another alarming piece of data I learned: world market prices for major food commodities, such as grain and vegetable oils have risen to more than 60 percent from where they stood two years ago
So I did a little investigating to get to the bottom of this recent climb in my grocery bill, to find out what’s at the root cause of it.
My findings:
• The United States Department of Agriculture (USDA) confirms pretty much what we already know; which is, food is projected to increase 4.5 to 5.5 percent, as retailers continue to pass on higher commodity and energy costs to consumers in the form of higher retail prices.
• Don’t look now, but the commodities expected to increase the most, include poultry, fats and oils, processed fruits and vegetables, sugars and sweets, cereals and bakery products, according to the latest projections compiled by the Consumer Price Index. (CPI).
What’s causing this shocking spike in commodities?
According to a May, 2008 report issued by the Economic Research Service of the USDA, global consumption of meat has been growing more rapidly than consumption of grains and oilseed. Between 1985 and 1990, the USDA reports, production of beef, pork, chicken and turkey has risen more than 3 percent annually
Added to this, rapid economic growth in China and India, which accounts for 40 percent of the world's population, seeking to add more protein to their diet, has accelerated the demand for agriculture products; while an increase in petroleum in developing countries, dating back to 1999, has significantly contributed to rising oil prices. Oil imports of China alone, for example, has grown 20 percent from 166 million barrels in 1996 to 1.06 billion barrels in 2006
The energy crisis, of course, goes hand-in-hand with increased distribution and transportation costs. More importantly, as the U.S. dollar began to depreciate in 2002 and lost value relative to the currency of importing countries, the depreciation of the dollar raised prices; while the increase in global demand for oil, (due to rapid growth in developing countries), put further strains on the world prices of crude oil; so that by 2004, oil prices began to rise more rapidly than previous years.
And according to Edmund Estes from the Department of Agriculture and Resource Economics at North Carolina State University, mandated use and tax incentives for biofuels (corn for ethanol and biodiesel for soybeans) has increased demand and price for coarse grains, which includes wheat, corn, and soybeans. ``Price increases for coarse grains have a profound impact on all prices since they are the foundation ingredient for many other foods'', Professor Estes points out.
Acquiring water for agriculture use is becoming more difficult due to the increased expense of gravity-flow irrigation systems; and another often overlooked demand for agriculture products and energy is attributable to the rising worldwide population, which has increased by 75 million or 1.1 percent a year, despite the downward trend since the 1970's
Adverse world-wide weather conditions is yet another factor attributable to the food crisis, according to the 2007 data from USDA. Northern Europe, for example, witnessed a dry spring; Southeast Europe went through a drought; for the second consecutive year, the Ukraine and Russia experienced similar droughts; large swaths of the United States, had crops and yield wiped out due to multi-day freeze; Canada went through a hot and dry summer, resulting in lower yields for wheat, barley and rapeseed; Northwest Africa suffered a drought in key wheat and barley growing areas; Turkey had a drought that reduced yields in it nonirrigated production areas; Australia recently withstood another drought, for the third year in a row, triggering low grain yields with exports plummeting; and Argentina endured a late freeze that was quickly compounded by a drought, reducing corn and barley yields
If you have any doubts whether we’re in a worldwide food crisis, look no further than the tumultuous riots in some of the more low-income food-deficit countries, including: Guinea, Niger, Ethiopia, Mexico, Bangladesh, Haiti, Indonesia, Morocco and Senegal. More controlled demonstrations have taken place with millers and bakers in Malaysia, in Indonesia over soybeans and meats, meat marketers in Pakistan; while Peruvian farmers blockaded rail lines, protesting rising fertilizer costs; and the National Labor Federation in South Africa demonstrated against spiraling food and electricity prices
But there is a silver lining as we head into the July 4th weekend
Compared with the rest of the world, citizens of the United States who spend 10 percent of their disposable income on food, according to the USDA, has not been as severely impacted by the food crisis, at least according to Professor Edes, who informs me Japanese residents spend 13 percent of their income on food, France spends 14 percent, Mexico 21 percent, China 28 percent, and in India a staggering 40 percent. In addition, fuel often exceeds more than $9.00 a gallon in most of Europe.
-Bill Lucey
billlucey@bellsouth.net
Imagine what a family with a whole soccer team of children to feed must be going through.
Over the last few Sunday’s (my shopping day), I’ve noticed I can’t seem to pass through the checkout line without coughing up around $100, easily $20-$25 more than I normally pay.
The first few times, I thought I must have been tossing a few extras in my shopping cart that I don’t normally buy.
The problem is: I’m a regimented shopper; I buy the same items week after week. So it hit me like a tidal wave, recently, how the food crisis has really hit home.
Over the past year in the United States, food prices have shot up about 5 percent, more than double from the previous 10 year rate. Currently, annual food price inflation is running at 3 percent; the highest since the 1990's when it stood at 5.8 percent, according to Mike Walden, economist in the Department of Agricultural and Resource Economics of North Carolina State University..
Peter Timmer, meanwhile, Senior Fellow at the Center for Global Development, USA, said the last time the United States witnessed such a dramatic increase in food prices was in 1973-74, when there was a worldwide food crisis; and before that during the 1951 Korean War commodity boom.
Another alarming piece of data I learned: world market prices for major food commodities, such as grain and vegetable oils have risen to more than 60 percent from where they stood two years ago
So I did a little investigating to get to the bottom of this recent climb in my grocery bill, to find out what’s at the root cause of it.
My findings:
• The United States Department of Agriculture (USDA) confirms pretty much what we already know; which is, food is projected to increase 4.5 to 5.5 percent, as retailers continue to pass on higher commodity and energy costs to consumers in the form of higher retail prices.
• Don’t look now, but the commodities expected to increase the most, include poultry, fats and oils, processed fruits and vegetables, sugars and sweets, cereals and bakery products, according to the latest projections compiled by the Consumer Price Index. (CPI).
What’s causing this shocking spike in commodities?
According to a May, 2008 report issued by the Economic Research Service of the USDA, global consumption of meat has been growing more rapidly than consumption of grains and oilseed. Between 1985 and 1990, the USDA reports, production of beef, pork, chicken and turkey has risen more than 3 percent annually
Added to this, rapid economic growth in China and India, which accounts for 40 percent of the world's population, seeking to add more protein to their diet, has accelerated the demand for agriculture products; while an increase in petroleum in developing countries, dating back to 1999, has significantly contributed to rising oil prices. Oil imports of China alone, for example, has grown 20 percent from 166 million barrels in 1996 to 1.06 billion barrels in 2006
The energy crisis, of course, goes hand-in-hand with increased distribution and transportation costs. More importantly, as the U.S. dollar began to depreciate in 2002 and lost value relative to the currency of importing countries, the depreciation of the dollar raised prices; while the increase in global demand for oil, (due to rapid growth in developing countries), put further strains on the world prices of crude oil; so that by 2004, oil prices began to rise more rapidly than previous years.
And according to Edmund Estes from the Department of Agriculture and Resource Economics at North Carolina State University, mandated use and tax incentives for biofuels (corn for ethanol and biodiesel for soybeans) has increased demand and price for coarse grains, which includes wheat, corn, and soybeans. ``Price increases for coarse grains have a profound impact on all prices since they are the foundation ingredient for many other foods'', Professor Estes points out.
Acquiring water for agriculture use is becoming more difficult due to the increased expense of gravity-flow irrigation systems; and another often overlooked demand for agriculture products and energy is attributable to the rising worldwide population, which has increased by 75 million or 1.1 percent a year, despite the downward trend since the 1970's
Adverse world-wide weather conditions is yet another factor attributable to the food crisis, according to the 2007 data from USDA. Northern Europe, for example, witnessed a dry spring; Southeast Europe went through a drought; for the second consecutive year, the Ukraine and Russia experienced similar droughts; large swaths of the United States, had crops and yield wiped out due to multi-day freeze; Canada went through a hot and dry summer, resulting in lower yields for wheat, barley and rapeseed; Northwest Africa suffered a drought in key wheat and barley growing areas; Turkey had a drought that reduced yields in it nonirrigated production areas; Australia recently withstood another drought, for the third year in a row, triggering low grain yields with exports plummeting; and Argentina endured a late freeze that was quickly compounded by a drought, reducing corn and barley yields
If you have any doubts whether we’re in a worldwide food crisis, look no further than the tumultuous riots in some of the more low-income food-deficit countries, including: Guinea, Niger, Ethiopia, Mexico, Bangladesh, Haiti, Indonesia, Morocco and Senegal. More controlled demonstrations have taken place with millers and bakers in Malaysia, in Indonesia over soybeans and meats, meat marketers in Pakistan; while Peruvian farmers blockaded rail lines, protesting rising fertilizer costs; and the National Labor Federation in South Africa demonstrated against spiraling food and electricity prices
But there is a silver lining as we head into the July 4th weekend
Compared with the rest of the world, citizens of the United States who spend 10 percent of their disposable income on food, according to the USDA, has not been as severely impacted by the food crisis, at least according to Professor Edes, who informs me Japanese residents spend 13 percent of their income on food, France spends 14 percent, Mexico 21 percent, China 28 percent, and in India a staggering 40 percent. In addition, fuel often exceeds more than $9.00 a gallon in most of Europe.
-Bill Lucey
billlucey@bellsouth.net
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