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Not only are we paying more for fuel
at the pump, prices are also rising at the grocery store – and
it’s something consumers may have to get used to for awhile.
Ag economists who’ve studied food
price fluctuations say these trends typically happen in
five-year cycles. For instance, prices flare up in the first two
to three years of the cycle and then start to moderate by the
fourth or fifth year, explains Chris Hurt, agricultural
economist at Purdue University .
He anticipates that if 2007 was
the first year of this latest cycle, farm supply could start
catching up to demand by 2010, helping to push down milk, bread,
cereal and other grocery prices.
Until then, Americans will be
moving backward in their [food] lifestyle, anticipates Hurt. By
that he means that more families will opt for cheaper food
alternatives, or eat out less often, in order to adjust their
budgets to both higher food and fuel costs.
Wal-Mart has recently reported
data on spending patterns in its stores that support the trend.
The retailer said shoppers are buying more white meat and less
red meat, stocking up on larger package sizes and buying more
boxed frozen meals as eating at home replaces going out.
Why Now?
Experts point to four main global trends for the rise in food
prices.
First, growing incomes in
developing countries such as China, India, Malaysia mean
citizens in these countries are eating better and more
frequently, thereby putting more demand on the global food
supply.
Second, adverse weather patterns
over the past four years have harmed crop production in
Australia, southern Europe, Ukraine and even parts of the United
States.
Third, the United States is
normally a big food surplus nation but, with a weak dollar, a
lot of excess production is going overseas and this is pushing
up domestic prices.
Fourth, burgeoning demand in the
European Union and the United States for ethanol and other
biofuels has sparked a price surge in corn, soybeans, sugarcane
and other commodities used to produce those alternative fuels.
Despite these food price hikes,
Americans still spend only about 10-12% of their disposable
income on food and beverage purchases per year, according to the
Department of Agriculture. That’s below the 15% share of
disposable income that Europeans spend on food and drinks, and
the whopping 70% that citizens of Pakistan and Bangladesh budget
for consumables, says Hurt.
But higher prices aren’t here to
stay, Hurt says. He’s confident that producers will allocate
more land to production over the next two to three years. “I
expect greater use of technology to increase crop yields and
better use of genetics to create drought-tolerant crops,” he
says.
Other Impacts
Some other trends are being seen – or anticipated – due to
high food prices.
For example, author Michael
Pollan, along with some other critics of the American way of
eating, actually likes the idea that some kinds of food will
cost more. He says as the price of fossil fuels and commodities
like grain climb, nutritionally questionable, high-profit
ingredients like high-fructose corn syrup will, too. As a
result, Pollan predicts Cokes (and other soda pops) are likely
to get smaller and cost more. Then, the argument goes, fewer
people will drink them.
And if American staples like
soda, fast-food hamburgers and frozen dinners don’t seem like
such a bargain anymore, the American eating public might turn
its attention to ingredients like local fruits and vegetables,
and milk and meat from animals that eat grass.
Higher food costs, Pollan and his
followers say, could push pasture-raised milk and meat past its
boutique status, make organic food more accessible and spark a
national conversation about why inexpensive food is not really
such a bargain after all.
“It’s very hard to argue for
higher food prices because you are ceding popular high ground to
McDonald’s when you do that,” says Pollan, a contributor to The
New York Times Magazine and author of “In Defense of Food: An
Eater’s Manifesto” (Penguin Press). “But higher food prices
level the playing field for sustainable food that doesn’t rely
on fossil fuels.”
More Changes Ahead
Fewer Fast Food? In late July Los Angeles city officials
voted unanimously to place a moratorium on new fast-food
restaurants in an impoverished area of the city. The yearlong
moratorium aimed at South Los Angeles is intended to give the
city time to attract restaurants that serve healthier food. The
action, which the mayor must still sign into law, is believed to
be the first of its kind by a major city to protect public
health. Research suggests 30% of adults in the South Los Angeles
area are obese, compared to 19% for the metropolitan area. A
report by the Community Health Councils found 73% of South Los
Angeles restaurants were fast food, compared to 42% in West Los
Angeles.
Going Green. In Seattle, the
mayor has proposed implementing a 20-cent “green fee” on
disposable shopping bags at Seattle grocery and convenience
stores. He also wants to ban foam containers from the local food
service industry. Environmental groups have applauded the
initiative, which could take effect January 1, 2009.
According to Seattle Public
Utilities (SPU), roughly 360 million paper and plastic shopping
bags are used in Seattle each year. That’s the equivalent of
about 8,500 tons of greenhouse gases. SPU would collect roughly
$10 million annually from the fee and about $2 million would
help Seattleites make the transition to reusable bags. The rest
would be used to promote waste prevention and environmental
education in the city.
Brand Connections. Colorado State
University meat scientist Gary Smith, PhD, speaking at the 2008
Beef Improvement Federation’s Annual Research Symposium in
Calgary, Alberta, this summer outlined some of the latest trends
in value-added and branded beef production. Smith believes
consumers increasingly want a closer connection to their food
and its production.
Safeway, Kroger and Super-Value,
he notes, have developed their “own” brands of “natural” or
“organic” beef over the last few months, but their sales of such
products have been disappointing. One reason, he says, is that
consumers who purchase and eat natural, organic or grass-fed
beef want to feel connected to the source of that beef. They
want to believe that someone, some specific farmer or rancher,
personally provided oversight of the raising system.
To that end, Smith says the idea
of “story beef” includes new elements, with consumers asking
whether the people who grew the cattle live nearby, properly
care for the animals, treat farm and ranch workers fairly,
practice environmental stewardship, operate sustainably and
receive a fair price. In reference to buyers of grass-fed beef,
Smith adds that most of them don’t care as much about what the
cattle ate as they do about how the cattle were raised — on
pasture versus in confinement.
Smith also notes that while
demand for natural and organic beef has grown substantially in
recent years, the current downturn in the economy is slowing the
market for these high-end products. Retailers, he says, are
asking some branded companies to back off on some “never-ever”
requirements to keep production costs — and retail prices — in
line.
Retail Variety. Another new trend will be changes within the
store – with a focus on specialization and convenience. For
instance, in Myrtle Beach, South Carolina, grocery chain Piggly
Wiggly has designed a store to fit the way people instinctually
shop. For example, when shopping for cereal, a customer will
intuitively search for milk. In most grocery stores, milk and
cereal products are located in different sections. In the new
Piggy Wiggly store, however, milk and cereal are positioned side
by side. Beverages, like coffee, wine and beer, are featured
together.
This is possible through new
technology that makes it efficient energy-wise to place
refrigeration cases throughout the store. Fifty years ago, on
the other hand, stores were only designed with refrigeration
around the store perimeters. These new developments in modern
technology have enabled Piggly Wiggly to position things like
different forms of fruits and vegetables together. Now, fresh,
canned and frozen corn can all be found in the same aisle – a
real time-saver for customers.
In addition, the new store
features four one-stop stations where consumers can find all the
ingredients they’ll need to prepare a full meal, complete with
recipes and instructions. An on-site “Dream Dinners” franchise
allows shoppers to prepare a week’s worth of meals for the
entire family in just a few simple steps. Shoppers on the go can
call ahead and order a chef prepared meal for dinner. They’ll
even bring it to your car. |
