Rising food prices. Everyone’s talking about them. And everyone’s pointing fingers of blame.
It’s the ethanol industry. No, it’s the processors. It’s the retailers. No, it’s the weather. It’s the subsidized farmer. No, it’s Big Ag.
Actually, it’s a whole host of triggers: grain shortages worldwide, Middle East turmoil that sent oil prices soaring, extreme weather (drought in Russia, floods in Australia and other storms that hit food-producing regions around the globe). And there’s more: fewer ag research dollars, the economy, politics, and a growing global demand for food (a biggie).
And no one really knows what to do — or can they even try?
The Food Institute reports wholesale food prices increased 3.9 percent in February, taking the Producer Price Index for finished consumer foods 7.3 above February 2010, the largest year-over-year gain in that index since 1974.
All told, says Purdue ag economist Corinne Alexander, we’ll spend about 4 percent more for food this year than in 2010.
“We’ll see these higher food prices until we rebuild global stocks of the primary crops,” she adds.
Ah, the sticky stocks issue. No one wants to go there, either, ever since the 1996 farm bill reduced stockpiles’ significance .
It’s a controversial subject, admits Ohio State ag economist Carl Zulauf, “but I do think we should at least have a discussion about the tradeoffs that are involved, especially in light of recent global production shortfalls.”
The stocks-to-use ratio for all grains worldwide is roughly 19.4 percent, below the 10-year average of 21.4 percent.
“When your stocks are low, even small changes in production will have an impact on prices,” Zulauf reminds us.
Now, as an aside, I would like to point out this: The farmer gets very little of the consumer’s food dollar. The USDA’s Economic Research Service‘s latest industry figures (not marketing), show farms get just 11.6 cents out of every food dollar.
The lion’s share goes to food services, at 33.7 cents. Food processing gets 18.6 cents, and retailers, 13.6 cents.
Incidentally, the amount from each food dollar going to the energy industry is almost 7 cents, an increase of 75 percent from 1998.
Another accounting shows farm costs account for just 22.5 percent of the entire retail food basket.
I don’t look for the issue of rising food prices to go away, although a year with “average” weather and “average” yields worldwide, would help.
The bottom line, however, is this: Most experts say we will need to increase food production by 70 percent to feed a global population of 9 billion by 2050. And we aren’t going to get there by pointing fingers.