Food Costs Spiking

I’m sure we’ve all noticed that the grocery bills have been steadily getting bigger in the last few years. Well, the AP just released a story showing that not only are food prices climbing, they’re rising at the fastest rate in 17 years.

The U.S. is wrestling with the worst food inflation in 17 years, and analysts expect new data due on Wednesday to show it’s getting worse. That’s putting the squeeze on poor families and forcing bakeries, bagel shops and delis to explain price increases to their customers.

U.S. food prices rose 4 percent in 2007, compared with an average 2.5 percent annual rise for the last 15 years, according to the U.S. Department of Agriculture. And the agency says 2008 could be worse, with a rise of as much as 4.5 percent.

What’s worse is that the economic conditions leading to this rise aren’t likely to go away any time soon.

USDA economist Ephraim Leibtag explained the jumps in a recent presentation to the Food Marketing Institute, starting with the factors everyone knows about: sharply higher commodity costs for wheat, corn, soybeans and milk, plus higher energy and transportation costs.

The other reasons are more complex. Rapid economic growth in China and India has increased demand for meat there, and exports of U.S. products, such as corn, have set records as the weak dollar has made them cheaper. That’s lowered the supply of corn available for sale in the U.S., raising prices here. Ethanol production has also diverted corn from dinner tables and into fuel tanks.

Soybean prices have gone up as farmers switched more of their acreage to corn. Drought in Australia has even affected the price of bread, as it led to tighter global wheat supplies.

The jump has left people in the food business to do their own explaining. Twin Cafe Caterers in lower Manhattan posted a letter on its deli cooler: “Due to the huge increase of the gas, the electricity, the water and all the other utilities, we had to raise the prices a little bit.” It went on to say that all its food prices have risen, too.

Really, does this story require elaboration? The idiotic ethanol craze, drought in Australia, rising afluence in China, oil… this is the face of the future people. Don’t expect it to get any better any time soon without drastic action.

h/t: Justin Gardner of Donklephant

3 Responses to “Food Costs Spiking”

  1. Chief says:

    A four and a half percent increase ? ? As Col. Potter would say, “Horse hockey.” We gotta be talking a 10 % increase this year. And ethanol? It has got to be the stupidist idea since the “pet rock.” As a gallon of ethanol only has 70% of the energy of a gallon of gas, making ethanol is about a break even proposition. Let’s harness the sun or the wind.

    In 2000 corn and soybeans both had about 72.7 million acres harvested and wheat had about 53 million acres harvested.

    In 2007 corn acreage harvested increased to 86.1 million acres while soybeans dropped to 62.8 million acres harvested and wheat dropped to 51 million acres.

    All figures come from the ARS (Agricultural Research Service).

  2. DM Metzger says:

    As a gallon of ethanol only has 70% of the energy of a gallon of gas, making ethanol is about a break even proposition. Let’s harness the sun or the wind.

    It’s issues like this that make me a strong proponent of generation 3+ nuclear power plants. They have little to no waste (depending on the generation of the plant), no particulate or greenhouse gas pollution, and could easily replace all of our coal/LP power plants with enough leftover capacity to power an electric car economy. It’ll never happen, but that doesn’t mean it shouldn’t.

  3. Chief says:

    The only problem I have with Nuclear Power is the same problem I have with airlines. Both industries are “for profit” and they skimp in Safety. The only reactors I have been around have been operated by the U.S. Navy. Neither profit nor safety was ever an issue.

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