April 15 2014

Food Prices Rising

Julie Gunlock

Last month, The Wall Street Journal's James Freeman predicted food prices would rise:

Tuesday's report on U.S. inflation is expected to show modest price increases. Economists polled by the Journal expect February data to show an annual increase of just 1.1%. But thanks to drought conditions in various regions, food prices are surging

The Journal reports that "in California, the biggest U.S. producer of agricultural products, about 95% of the state is suffering from drought conditions, according to data from the U.S. Drought Monitor. This has led to water shortages that are hampering crop and livestock production." 

But don't give Mother Nature all the blame. Allysia Finley recently explained in these pages how environmental regulations allegedly intended to protect fish like the tiny smelt are diverting water from California agriculture. 

Now the federal government expects U.S. retail food prices to rise up to 3.5% this year. This would be the largest annual increase in three years, and would continue a decade-long trend of food prices rising faster than general inflation. Sounds like a war on the middle class.

Consumers are seeing similar prices hikes on the price of bacon and other breakfast staples like coffee and orange juice because of global supply problems.

And today, Time reports that the price of beef has reached its highest price point in almost three decades at $5.28 per pound in February. Analysts estimate that prices will likely stay that way for some time because of growing demand in some Asian countries as well as the droughts that have hurt U.S. farmers.

Corn growers are also hurting. Thanks to China's recent rejection of 1.45 million tonnes of U.S. corn, U.S. grain companies swallowed $427 million in lost sales and costs associated with re-routing shipments. 

In addition, increasing pressure from anti-GMO activists to label food that contains GMOs (around 90 percent of processed food contains GMOs) will significantly raise prices for consumers. For instance, recent studies show that a mandatory GMO labeling requirement in California will increase costs to that state’s food producers by $1.2 billion a year and it would increase the average family’s grocery bill by more than $400 a year.

$400 a year? Think about that? Think about what a family could so with that money? Camp for the kids, a mini-vacation, or essentials, like shoes, clothes, medical care, and school-supplies.  And what for? Thousands of studies have certified the safety of GMOs. There is no nutritional difference between non-GMO food and genetically modified food. Yet, the fear-based narrative employed by the alarmists is creating a demand for GMO labeling.

Want to have a better sense of how GMO labeling laws will affect farmers? Check out this very informative blog by Jennie Schmidt, a registered dietitian and a full-time Maryland farmer who also runs a blog called the The Foodie Farmer. In a recent blog post, Schmidt explained why segregating corn into GMO and non-GMO will be extremely costly and will require the development of an entirely new grain storing system.

So where's the cost you ask? Well, every farmer in the region is hauling grain usually around the same time... to the same group of elevators. Hopefully you read my blog on seed choice last year and realize that all farmers determine their own purchases for seed and we don't all grow the same thing. In fact, we grow 3-4 different varieties of corn ourselves. Why? Because we match the varieties of corn to our soil types. That's called good stewardship and good business practice.

The food supply chain in the United States relies on a system of commingling, grain delivered to the elevator by farmers throughout the region. Maryland has 2 million acres of farmland, nearly a half million of which grew corn in 2012. In a not very good growing year, Maryland farmers produce 53 million bushels of corn.

If GMO labeling were to pass, that would require a HUGE addition to both on and off farm storage. Nationally, we're talking billions of dollars in infrastructure needed to segregate grain. What none of these labeling laws is clear about either is how to achieve this segregation? Should it be segregated by trait? by variety? both? The more layers of segregation, the more infrastructure is required and the more the costs escalate. 

Segregation is costly.

Yes, segregation is costly. So is fear. In a world of rising food prices, consumers can at least keep some prices lower by rejecting the demands of food activists who demand more and more labels on food sold in grocery stores. 

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