Tue, May 06, 2008
The High Cost of Eating
For some months, the number of articles in financial publications on rising commodity prices has increased noticeably. I guess it's not a surprise that articles in the popular press on rising food prices are now cropping up with greater frequency.
The impact is being felt locally and worldwide. The Boston Globe recently reported that food banks are being squeezed by the high cost of food, with the wholesale price of turkey up over 35% versus last year. Food-related charities will have critical needs for more donations this year. In Asia, the price of rice has reportedly tripled in four months, which seems incredible. The Organization for Economic Cooperation and Development reports that food prices are up 5% in the past year.
The increasing cost of energy, including petroleum and natural gas, is undoubtedly a factor (in addition to the connection between oil and transportation costs, the cost of fertilizer is linked to methane, which is needed to make ammonia), but there have also been shifts in the crops being planted as the profitability of various grains, including corn, has increased. The push to increase ethanol production from corn has encouraged farmers to plant corn rather than other crops.
Food prices are already a significant expense for most of my clients: for some, the cost of eating out hits hard; for everyone, groceries are essentially a fixed expense. Everyone has to eat and even if you cut down on going to restaurants, there are only a few ways to reduce grocery expenses. Perhaps eating out will become less attractive as a result of rising prices; the Washington Post reported last month that restaurants are finding ways to serve their patrons less food while maintaining the illusion that the portions aren’t actually smaller.
We haven’t had the official word that a recession is present. It does seem that inflation has picked up. If the National Bureau of Economic Research (the go-to guys when it comes to determining whether we’ve had a recession) decides we can start using the R-word, we may have a revival of stagflation (yet another seventies thing we hoped would never come back).
If you’re interested in trying to find ways to save on food spending, here a few links to web sites with helpful suggestions. “Saving money and being happy” has several posts on reducing grocery costs, and budgetlexicon offers an idea for reducing spending on take-out food .