When those news stories break that simply report the numbers in this or that consumer price index, there is always a back story.
The most recent example is the release of the USDA 2011 Consumer Price Index. Here’s the opener from the USDA:
In 2011, the Consumer Price Index (CPI) for all food is projected to increase 2 to 3 percent. Both food-at-home (grocery store) and food-away-from-home (restaurant) prices are also forecast to increase 2 to 3 percent. Although food price inflation was relatively weak for most of 2009 and 2010, higher food commodity and energy prices have recently exerted pressure on wholesale and retail food prices.Hence, higher prices are projected to push inflation toward the historical average inflation rate of 2 to 3 percent in 2011.
Given the economic worries of the moment, most listeners and readers of news reports won’t question this. Who can blame ‘em? But there’s another angle to consider. This excerpt is from a news release issued by Wenonah Hauter, executive director of Food & Water Watch.
This week’s release of the USDA 2011 Consumer Price Index analysis demonstrates that a more industrialized, consolidated food supply does not translate to lower grocery bills for consumers…
Inflation for beef, pork, eggs and dairy is anticipated to be sharpest. Not coincidentally, these are the same industries that have experienced the most consolidation over the past two decades and are controlled by the fewest number of large agribusinesses.
While these largest companies claim that mergers and acquisitions allow for efficiencies of scale that create cost savings for consumers, the reality is consumers rarely see a decrease in what they pay for food…
The bottom line is clear: consumers are paying more for their food, farmers are receiving less, and the companies in the middle are soaking up the profits.
Hauter goes on to urge the USDA to stand up against what she characterizes as AgriBiz bullies before American families are completely unable to feed their families.
A chatty piece in Smart Money back in August noted some other things that drive food prices up, including fickle weather and demands from other markets. “The [2010] rise in beef prices was the result of greater demand from Asia and beef supply issues in the U.S., the largest beef producer in the world. Because a significant increase in the nation’s cattle herds usually takes more than two years, the U.S. is having trouble creating enough supply to keep up with new demand. The gap is lifting prices.”
Assume both views are valid — and you can see a major challenge. Would US beef producers have the infrastructure and volume needed to export without ownership by Agri-giants? What happens if those exports drop off?
(Update: Never mind beef prices, check this out.)
