Stunned by record-breaking increases in food prices worldwide, consumers everywhere (including several shoppers who’ve recently commented to the Willy Street Co-op) are justly seeking answers. Evidence suggests there are a handful of factors driving up prices including climatic shock, ethanol production, widening global demand for meat, and depreciation of the dollar. Whether it’s one, or the crushing weight of all those reasons, new totals for our food bills can be jarring when compared to prices from just one or two years ago.

For many years, Willy Street Co-op has contracted with our farming partners in early winter to insure their harvests will yield a consistent and mutually agreed-upon price throughout the growing season. In response to the spike in grain prices, many packaged food vendors, especially those making bread, flour and pasta, have already increased their prices, while others have held off changing prices for as long as possible to avoid risking customer loyalty. Fruit and vegetable prices are routinely the fastest to reflect any significant changes in fuel prices or from climatic events, but the doubling of wheat and tripling of rice prices since 2006 has all sectors of the food industry struggling to keep up with their cost of goods.

Protein increase

In a comprehensive study published for the Farm Foundation in July of 2008, a Purdue University team of researchers summarized a long list of recent studies and reports on food price inflation, concluding that “growing food demand and dietary transition to more protein in developing countries [are] resulting in global consumption increasing faster than production. Many of these [demands are increasing in] China and India.” In summary statements, the authors agreed, “that global growth in demand and lagging supply are major drivers of the current situation.”

Biofuels

Details from the study, which can be found at www.farmfoundation.org, included historic information on the biofuel industry in the U.S., dating back to the Carter administration. Among the contributing factors driving the rise in food prices, the authors focused on the large body of evidence suggesting that “Biofuel programs in the United States and European Union, which provide subsidies and mandates for biofuels are leading to greater use of corn and vegetable oil for biofuels, thereby increasing the prices of these commodities.” They state further, “Most of the global increase in demand for corn in the past four years has come from the growth in the United States’ use of corn for ethanol. The reality is that most of the increase in corn demand has been driven by the higher oil price and the fall in the U.S. dollar. In round numbers, corn has gone from about $2 to $6 as oil has gone from $40 to $120. About $3 of the corn price increase is due to the higher oil price and $1 to the ethanol subsidy.”

The authors concluded their commentary by stating, “We have not yet seen the full transmission of commodity process to consumers. Meat and animal byproduct prices do not yet fully reflect the higher corn and soybean meal prices. Over time, these prices will have to increase more to cover the higher costs.”

The hardest hit

Globally, the impact of mounting food prices has fueled rioting in Haiti, Mexico, Africa and India where food prices have increased 58 percent in some cases, putting the lives of millions of people at risk. The United Nations World Food Programme website reports, “The people hit hardest by this combination of factors are those living on the razor’s edge of poverty. In rich countries people spend 10 to 20 percent of their income on food so they can afford to pay more. In many poor countries they already spend 60 percent, sometimes even 80 percent, of their budget on food.

Natural and organic

Meanwhile, natural and organic consumers across the U.S. have been absorbing similar increases in their food costs and in an article called “Sticker Shock in the Organic Aisles,” published in the New York Times in April of 2008, authors Andrew Martin and Kim Severson wrote about the effects of world prices on organics and its mere two to four percent portion of the entire U.S. food industry. Here they quote Bob Eberly, president of Eberly Poultry in Stevens, PA, “In the last three months or four months,” Bob said, “everyone along the chain in organic food is not making their margins.” The cost of raising poultry has increased 16 percent in the last six months, but he said his prices had increased only 7 percent. “In the next month or so, our customers are going to see a significant price increase,” he said. “We just have to do it.”

Local effect

Madison business owner, Peter Robertson of RP’s Pasta commented recently about his business’s ability to manage the surge in wheat prices, “Our costs tripled and we ended up only increasing the price of our pasta 15 to 20 percent.” In response Peter said, “We had to take a huge bite of it and pass on some of it to the customer.” Peter added that he’s pleased with their compromise to take a middle-of-the-road approach to the dilemma but also indicated that the manufacturers who’ve held off raising their prices may be part of the problem about consumer shock over increased prices. Peter reported that between fuel prices and grain prices, these costs have been rising over the last 10 years and a fair number of food producers who haven’t raised their prices accordingly have created a false sense of value about their products.

The recent fire at a key organic feed mill in Cashton, Wisconsin, which sustained a near total loss on July 17th, 2008, could lead to more shortages and financial burden on organic livestock farmers in our area.

One of only two feed mills in the state that specializes in supplying organic feed, the owner of the mill, Ernie Peterson reports that they’re already planning to rebuild and that two other mills in the area have offered to help keep them up and running. Combined with early summer flooding and the significant loss of newly planted organic crops in the area, the sum total is likely to cause increased prices for locally grown organic foods.

Small farming is the future

And finally, from Wisconsin’s own farmer-philosopher and organic farming advocate Jim Goodman, who offered this solution to the dilemma in his article that appeared in the Capital Times on July 28th, “Small [farming] is the future. We know indigenous farmers can produce more food using traditional farming methods. They have no need of genetically modified seed or chemicals.

“We cannot continue to feed grass-eating animals a diet of grain, nor can we continue to fill our fuel tanks with grain. We cannot continue to encourage and subsidize industrial agriculture at the expense of small local producers.

“Accepting the value of ‘smallness’ and living more locally is the solution. Embracing small and local addresses the failure of systems—whether it is the failure of the globalized food system to embrace food sovereignty, the failure of capitalism and its penchant to move more wealth to those who already have more than enough, or the failure of an entire society that has based its existence on oil.”

Finding a balance

In light of these rough and uncertain times, with the support of our owners and shoppers, we at your grocery cooperative are committed to achieving the best balance between paying our staff and vendors a reasonable rate and offering products at affordable prices—keeping the Co-op strong and continuing to support our community.