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Cheap food: Part of our American lifestyle may be about to go

Art Dawson Published on 16 March 2011

What can you and I do about this? Is it out of our control?

We have had decades to enjoy cheap food. Food eaten at home combined with food eaten away from home in the U.S. has consumed around 10 percent of disposable income since 2005. This cost is down from 20.6 percent in 1950 and 13.8 percent in 1975. We have been at essentially the 10 percent level ever since.

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So what’s the problem? The worldwide “food crisis” of 2008 was never completely alleviated. You may remember when basic grains like wheat and rice were in severe shortage.

That was when my neighbor, who owns a Chinese restaurant, had to drive all over town looking for rice. When he found bags of rice, he discovered it was available in “limited two bags per customer” quantities.

Since then, wheat supplies have continued to be insufficient around the world. Drought-driven wheat shortages have continued to plague Russia.

As a result, Russia cancelled her wheat exports. Within the country, food inflation is reported at 25 percent year on year, up from 7.5 percent before the drought.

Egypt is the world’s largest importer of wheat, importing 11 million tons of wheat annually. According to the World Bank, wheat prices went up 74 percent between June and November. Although the Egyptian government subsidizes wheat, the cost of many consumer food items parallels the 25 percent and higher increases found in Russia.

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What’s happening? Global grain “carryover stocks” are down – 64 days’ worth of consumption was reported in early February. This level of carryover coincides with the same 64 days’ worth of carryover stock that marked the food crisis of 2008.

China could be adding to the problem. The weather is out of control in China, too! China is the world’s largest wheat producer. Most of China’s own production is consumed domestically.

Current weather in China bodes for rainfall shortages affecting winter wheat. The coming months’ weather could alleviate this situation, but presently no relief is being reported.

What’s happening closer to home? Well, we all know that our grain production has been shifting from wheat into ethanol-suitable corn. U.S. wheat acreage was at its peak in 1981 and has declined by 30 percent, roughly 30 million acres, since that time.

The U.S. provides between 20 to 30 percent of the world’s wheat exports, so our shift to corn is not necessarily helpful to wheat-importing countries.

What about our salads? For now at least, the supply of fruits and veggies grown in the U.S. and Mexico seems to be out of control. The nights of February 3 and February 4 brought freezing temperatures to Mexico’s vegetable areas.

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The most severe freezes since 1957, according to vegetable industry experts, have wiped out much of the Sinaloa and Sonora’s field-grown green beans, cucumbers, bell peppers, tomatoes and, distressingly, corn. Even the cool mountain areas of Chihuahua State were hit with uncommon cold air which brought bud damage to the dormant apple trees.

The salad situation was already dire. Florida’s vegetable and fruit industry took a major frost damage hit earlier this winter. Florida has been experiencing losses due to cold weather for several years. The American consumer hasn’t had much to worry about until now because the Mexican industry always stepped in to contribute.

Locally, we are already experiencing increasing food prices. Wholesale prices of round tomatoes were at $35 per box and grape tomatoes at $50 per box on Feb. 14. This price increase will take only a few days to hit my grocery store and yours.

Cheap food is important for all of us in the U.S., but for some of our people, cheap food is critical. Critical as it is to us, cheap food can be vital for folks living outside the U.S.

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Take a look at the graph at right. This data brings meaning to the old cliché: “High-cost food is the cruelest regressive tax.” The inference is that “the more money one has, the more one can withstand an upward trend in food prices.”

This is strongly suggested in the graph’s comparison of 21 countries. It is not comforting to consider how this graph would look if instead of “foreign” countries, it depicted the complete range of annual incomes for U.S. citizens.

What can we do? As stated earlier, things may well be out of control. After all, we can’t change the weather!

But we can proceed with our eyes open. We can make a few important distinctions in our day-to-day thoughts and actions.

Most importantly, the planet’s food supply is not unlimited. Farmers and dairymen can produce ourselves into price gluts and overabundance in certain food sectors in certain localities at various times. But food is not universally abundant. Food is universally vital.

We can remember that one’s own actions impact the supply of food globally. In this context, the old saying of “act locally, think globally” really applies. Think about it: The global impact of a drought in China can be either alleviated or exacerbated by our own country’s policy on fuel mixtures for our automobiles.

How deeply were we thinking when we created a preference for ethanol over wheat? I am not qualified to pass judgment, but did we collectively think about the downstream consequences?

It may be true that the annual returns in the corn-growing sector of our country justify our policy but the consequences seem to be far-reaching.

What about the current drought in the Central Valley of California? Did the choices made by our EPA, our legal system, our environmental advocates and the U.S. Congress really mean to displace 250,000 acres of productive “Westside” farm land in 2009 and followed by another estimated 170,000 acres in 2010?

Did the California tax payer really intend to provide assistance to thousands of unemployed farm workers and their families while suffering the loss of sales tax, fuel tax, payroll tax revenue?

What about California’s inability to gather the collective will to build water storage facilities (read dams) in the foothills? January’s loss of rainfall in the mountain drainage around Fresno was large enough to supply the entire annual water needs of Fresno and its neighboring municipalities for an entire year! If Fresno gets good rains in March, most of the runoff will head for the Pacific Ocean.

The major events of our times – weather, population, politics – seem to be out of control. Maybe they always were. Nonetheless, we all can make critical choices as we think, vote and plan our business lives. PD

Art Dawson
President
The Dawson Company

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