The prices on the grocery store shelf have read like a book over the past few years, and it has not been a particularly upbeat tale.
The prices of nearly every food commodity meaning raw, unprocessed foods; think corn, not Corn Pops have increased markedly, some more dramatically than others.
According to figures from the US Department of Agriculture, the price of a dozen eggs rose 28 percent between May 2007 and May 2008. A box of lemons, $8.12 in 2007, cost $20.77 a year later. Wheat jumped 80 percent to almost $9 per bushel. Then there’s corn, which is fluctuating in the $6 and $7 range per bushel.
All in all, the consumer price index for food is forecast to increase 4.5 to 5.5 percent by the end of 2008, according to the USDA. Food commodities as a group had risen 60 percent over a two-year period as of May.
Area consumers have noticed the changes.
`My mother and father never looked at prices,` said Ronda Jeffer, an Albany resident who was shopping at a Price Chopper grocery store in Delmar. `Now she is looking at prices for the first time in 37 years.`
Jeffer continued: `I used to buy whatever I wanted. Now I’m more careful. I don’t throw anything out, and if I see something on sale, I’m going to buy 10 of them.`
Delmar resident Angela Leary echoed those thoughts.
`Everything I bought was on sale,` she said, pointing to her shopping cart.
`I’ve been shopping at different stores. I got to Wal-Mart to get the things I can’t get on sale.`
The situation is being felt by the area’s needy population as well. Lynda Schuyler is the executive director at Food Pantries for the Capital District, a group that helps 48 food pantries across Albany and Rensselaer counties meet their goals. She said that food pantries had taken in over 55,000 pounds of food at the end of July 2007. They’ve collected just 37,587 pounds so far this year, and she suspects the disparity isn’t a lack of generosity.
`The food thing is definitely down,` she said. `People kind of have an idea in their head, ‘I will buy $15 or $20 of food for the food drive.’ If you do that, last year, you got more.`
The reason behind the sticker shock
So what exactly is causing almost every type of food to jump in price?
There are many factors, according to a new report from researchers at Purdue University entitled `What’s Driving Food Prices?` The finger is pointed in many directions, but fuel costs, food stocks and the status of the U.S. dollar are the big three causes.
`Today, it’s like a perfect storm of all these things coming together at the same time,` said Wallace Tyner, an agricultural economist and one of the authors of the Purdue report. A big part of the picture, he said, is simple supply and demand economics.
`In the 80s and 90s we carried three to four months of food stocks,` said Tyner. `Today, we carry six to seven weeks of stocks. That means any kind of disruption ` all of a sudden a flood hits or a drought hits ` and people get nervous.`
He pointed to the June flooding in the Midwest that wiped out large corn crops. The event bumped up corn prices more than a dollar over the course of 10 days before they topped out at $7.96 a bushel.
`The reaction of markets is very different now when stocks are very low compared to when stocks are really high,` said Tyner. As long as there’s not enough corn out on the market, prices will have to remain high to keep consumption in check.
The price of all agricultural commodities is invariably tied to the poor state of the U.S. dollar as well. A weaker dollar makes U.S. agricultural exports far more attractive to foreign nations. Between 2002 and 2007, the value of the dollar slid 22 percent.
Developing nations are also demanding more and better foods, especially meats, and they are often feeding their livestock with American grain.
Additionally, some nations with food shortages are shutting down food exports altogether. Fourteen countries have limited or banned the exportation of rice; 15 have done the same for wheat; and more than a dozen have cut down on corn exports.
The G8 ` a group of eight industrialized nations ` has called for an end or decrease of such restrictions, saying more open trade would lower food prices worldwide.
The golden grain
Corn in particular is a hot commodity now that ethanol has become a big factor in battling high gas prices. Corn is used to make ethanol in the United States, and there has been a massive push to get more of that alternative fuel to the market. Some would say the increased demand for ethanol has lead to a backlash, creating high corn prices that cause a ripple effect into other markets.
`Essentially, the mechanism is higher crude leads to higher gasoline, which leads to higher ethanol, which leads to more ethanol production, which increases corn demand, which increases corn price,` states the Purdue report.
But a change in the price of a bushel of corn does not change the value of a box of cereal. According to the Economic Research Service, an arm of the USDA, an 18-ounce box of Corn Flakes contains about 12.9 ounces of milled field corn. Even $7 per bushel corn would mean only 10 cents of corn is in a box of Corn Flakes. The rest of the cost is composed of things like packaging, processing and transportation.
Corn is a big component of other things, though. One of those things is animal feed. Texas recently requested a lower requirement for ethanol in gasoline lately from the Environmental Protection Agency, citing, among other things, the high price of animal feed’s effect on cattle farmers. The EPA is considering the waiver.
The lesson is that the higher prices of meat and dairy that are being seen (and will be coming) to the grocery store isn’t just the result of increased transportation costs, it’s because it costs more to feed the animals that create the product.
That doesn’t mean that the government’s subsidy for growing corn is boosting the price, however. The $1 federal subsidy on a bushel of corn is only a small part of the $4 spike in the price of corn.
`If you took away the subsidy tomorrow, it would still be high,` said Tyner.
The Purdue report states that 65 percent of the increased demand for corn is tied to ethanol, with the remaining 35 percent tied to feed use.
Some businesses actually do rely on corn quite a bit, though. It is not an industry secret that most movie theaters make their profits off of concession sales. With inflated corn prices, the cost is going to be passed ` once again ` on to the consumer.
AMC Theaters, a movie theater chain with over 300 theaters nationwide, has bumped up ticket prices at many locations and increased the price of popcorn by 25 cents across the board to account for the jump in the price of corn.
Corn syrup is also more expensive, and that sugar substitute can be found in many of the processed foods Americans routinely consume. Heinz, the extremely popular ketchup-maker, uses corn syrup in its ketchup, but has also been in the process of growing a sweeter tomato that would require less corn syrup for years.
`The sweeter tomato has a clear economic advantage,` said Michael Mullen, a spokesman for Heinz. `It does reduce the cost for us.`
The long-term solution to spiking food commodity prices is not decided upon. Tyner says that the agricultural markets will eventually undergo a self correction, just like any other economic model. The difference is that most agricultural products are only produced a few times a year.
`It takes a while for the response to occur,` said Tyner.
He noted that while oil prices remains high, food prices will never go back to the levels of yesteryear.
`We won’t revert back to the old standards as long as crude remains high,` he said.
The long-term implications of higher food and fuel prices worry Schuyler, who is concerned about how the food bank will fare in the winter months.
`I’m a bit afraid of what may happen in November and December when folks have to start paying higher heating bills,` she said. `Donators will turn to consumers.
`If the pie gets smaller, and you have more people chewing on it, everyone’s piece gets smaller and smaller. It can only get so small before we have problems.`
SIDEBAR: School lunch programs feel sting of high food costs
BY CHARLES WIFF
Spotlight Newspapers
Parents who pack a brown bag every morning before their kids get on the school bus are probably keeping a wary eye on the prices at the grocery store. Even those students who buy their lunch in the cafeteria will be feeling a pinch in the fall.
Schools across the Capital District ` and all over the nation ` are getting ready to bump up the cost of breakfasts, lunches and milk. Many students will be paying an extra quarter, like kids in the Ballston Spa Central School District; elementary lunches there will be $1.75, secondary school prices will raise to $2.
It’s the same story in the Burnt Hills-Ballston Lake School District, where secondary lunches will cost $2.50, up from $2.25, and elementary lunches will be an even $2 after a 25-cent jump. Adults will be paying $3.75 for their meals, an increase of a quarter. Milk will also be going up 10 cents to 50 cents.
Prices in South Colonie are lower than those in Saratoga County schools, but will still be going up. Secondary lunch will increase 20 cents to $1.80, breakfast across the board is up a quarter, and milk will cost 15 cents more at 45 cents.
It’s not an isolated phenomenon. Nationwide, 75 percent of public schools will be increasing the price of school lunches.
The culprit is higher prices from food vendors.
`What we’re seeing is that delivery costs are increasing, in other words gasoline,` said Christy Multer, a spokesperson for BH-BL schools. `So our vendors are passing their increased costs to us, and unfortunately we have to pass them on to the residents.`
Ballston Spa contracts with Chartwells, which specializes in providing vendors for educational food programs. Though foods make their way to schools in a variety of ways, the increasing cost of food means strain is put on everyone, according to Guy Potvin, a regional director for Chartwells.
`Foods are more expensive at the supermarket, and it’s more expensive at the wholesale level,` said Potvin. `Less consistent commodity deliveries have driven up the cost for schools.`
Another contributing factor is the quality of the foods being offered in schools. Dietary requirements have become stricter over time ` calling for more fruits, vegetables and whole grains ` and that often means more expensive foods.
`The federal food [assistance] isn’t keeping up with the changes in the dietary programs,` said Ballston Spa Central Schools Assistant Superintendent Brian Sirianni. `These kinds of foods cost more money.`
The programs in many school districts are self supporting, meaning that proceeds from sales of meals and milk make providing the food possible and the food program doesn’t directly impact the budget.
`If we didn’t’ raise prices, the program wouldn’t be self-supported,` said Sirianni.
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