The Shopping Cart Economist

The state of the world financial markets has me mixed between elation and panic. I knew the market was in for a correction - many people did, but it was a matter of when and how much. I don’t think anyone could have predicted the global meltdown that we’re seeing with the market that we’ve seen in the past two weeks.

While I am glad for a market correction and recognize this as a sort of “coming out in the wash” for all the greed and corruption we’ve seen in the past dozen years coming off Wall Street, there is a small part of me that really gets doom and gloomy over what this means for our economy and the future of the US. It’s clearly going to affect the presidential election outcome (not necessarily to my liking) and for the conspiracy theorists out there who think this is the beginning of global monetization (the Amero as a new currency with Canada, US, and Mexico), it definitely is signaling something, but I’m not a real economist, so I can’t tell you what. (For that matter, I don’t think the real economists know either right now!!!)

What I do know is I believe there is going to be a dip in food prices that should send you running the store to stock up, and here’s why.

The price of oil fell very sharply which signals a weak demand which means that we’re looking at less economic output in the coming fiscal quarters. The result is that the decline of output means businesses are going to see less sales as consumers and businesses are hesitant to part with their money. Particularly in the business to business sector, this is going to really ring true. Think about the guy who sells farm equipment. If the farmers aren’t buying cause they have limited access to credit, there’s going to be some price-dropping across every part of the agricultural supply chain, including raw ingredients.

And on the consumer side of things, it means General Mills and Kellogg are going to duke it out for market share. Where I’m seeing this first is in small grocery stores that are trying to hold it together. Loss leaders are steep this week. One small store in my area has milk 2 for $3 - $1.50 a gallon. It’s been awhile since I’ve seen that price. Of course, loss leaders are really about getting people through the door to buy other goods, but that steep of loss leaders implies to me that we’re already starting to see pressure in the grocery market to be competitive. The big brands, who’ve been slammed with the messaging from the media to “buy generics” are ramping up marketing spends while cutting some prices. Even national chains like Kroger, Safeway, and Albertsons are changing their marketing tunes, and everything is “extreme buy” type sales. It’s the return of the true 10 for $10 sales. This week, orange juice 1/2 gallons at Fred Meyer, a local Kroger chain, are $1 each. That’s “extreme” compared to what it’s been in the past summer of high food price misery for consumers.

However, I don’t expect this to be the trend for long. It’s a dip in my opinion. We’re going to see some real competition for market share and tactics stores are going to use to get people through the door, particularly mass retail merchants like Kmart who offered double coupons last week and put a $5 off $50 coupon in the paper this week.

Once the dust settles and the losers have disappeared - either some brands changing hands or a few local stores closing, the decreased competition and decreased supply chain as farms and smaller food manufacturers are pushed out with lack of capital and declining sales, then we’ll see another spike in prices.

Again, all speculative, and all my opinion, but my opinions about the food industry have been pretty dead-on for several years now, so I feel pretty confident in passing on this opinion for you to do with as you see fit for your family. For me, it means I am going to take advantage of all the offers and sales I think are coming down the pipe in an effort to offset the money we’ve lost in the market this week. And in treating my own personal finances like business finances, if I can conserve my cash and accumulate some grocery inventory at the best possible prices, we’ll weather the storm in the long run.

Here’s a quick link to where I have my backyard pictures posted. This was early in the season. http://www.hotcouponworld.com/forums/members/hotcouponmama-albums.html

When all’s said and done, we got about:

75 ears of corn (which where the best ears we had all summer)
a dozen or so cucumbers
8 pumpkins
a few dozen apples, which was amazing for a first year planting
oodles of fresh lettuce
lots of basil
several pounds of blueberries - again, first year in the ground so I was pleased
30+ pounds of yellow squash
lots of tomatoes (still getting them, plus lots of green ones on the vine)
4-5 full stocks of celery
dozens of peppers of all kinds
a pint of raspberries
assorted beans and peas, enough for several dinners worth for us and guests
egglplant (which we don’t eat but my MIL was thrilled to have)
There’s a few dozen butternut squash about to be ripe as we speak
and then I should have carrots in a few weeks.

Got some potatoes in the ground so cross your fingers they pan out - I’d love to have potatoes this winter.

And then the citrus trees have given me grief, but I should be getting some lemons here soon. I shocked the hell out of them when I transplanted them early on and they dropped a lot of fruit - I was devestated.

For next year, I have one more 5x5 box I didn’t get to use cause the house wasn’t painted yet, as well as 6 smaller 2x3 boxes. I might even get a few huckleberries this fall….

Next up is to get the shelving in the greenhouse and I’m going to see how much I can grow in there this winter. The boys have really loved having fresh lettuce and lettuce in little 1 gallon containers works really well.

All and all, a very worthwhile use of my economic stimulus dollars (thanks George W) and with the current state of the economy, a prudent investment in the health, and financial well being, of my family overall.

First off, I have to apologize - I took the summer off from blogging cause my hubby was gone, so it was just me, the kids, a new job, and 9 graduate hours trying to finish my MBA. Toss in cheering at swim meets, remodeling the exterior of my house, and running a website…well, blogging sort of fell off the radar.

But, some things about the world food market have had me on the edge of my seat….enough that it’s time to make time to blog again about things I see that have some ramification for all of us.

One of the things we did with the exterior remodel was develop a chunk of our yard into garden and switch all of our landscaping (except lawn, roses, and big fir trees) into edible landscaping. First off, I’ll say, I’m not a granola monkey. While I believe that local is probably good for the environment, I am more concerned about how local is good for the economy.

We invested a significant chunk of money into the garden spaces and landscaping. When all is said and done, it will probably take several years to make back what we will save in produce for just what our family will eat. However, if I take the yard we’ve cultivated and grow it to it’s fullest potential, I’d be able to grow well over a few thousand pounds of food in the year. The berry bushes alone, at full maturity, could yield as much as 800 pounds. Then factor in (7) 5x5 raised beds, another (7) 2x3 and 2x4 raised beds, a green house, and several fruit trees, vines, and bushes, and we’re talking a lot of food. I don’t live on a farm…far from it! We just redesigned our yard to be very productive. The only reason we have a lawn is that we have young kids. If push ever came to shove, we still have 3000 sqft of lawn that could be converted to additional garden space.

This year, as a first year gardener, we grew a few hundred pounds of produce….more than my family could possibly eat. When I think of what my yard could produce, and what other people’s yards could produce, then it suddenly isn’t about local because of the environment. It becomes sheer economics of producing food for others to keep them from being hungry.

Even if we looked at our most hungry in America, we still cannot complain about our lot in life too much. The Minister of Welfare in India came out last month and proposed that the
people of India should eat rats for protein because they are accessible and poor people have been doing it forever, so the rest of the country should consider it. He’s so enamored of the idea that the country is going to consider it part of its plan for dealing with hunger.

I am thankful the Secretary of Health of the United States has yet to propose such a plan, but there’s not doubt in my mind that the government should be thinking about long term strategies for dealing with hunger and food security in our own country. Last week’s stock market turmoil and announcements of job layoffs across the country mean a lot of people are going to be struggling for a long time. Foodbanks and emergency feeding programs across the country were already tapped going into the end of 2007 for resources. And with donations to charities almost at a standstill, now would be a good time for Congress to consider a plan to rethink how we feed ourselves and put together a solution that would encourage homeowners across the country to “feed thy neighbor".

Here’s why a tax credit for gardening is a good idea….

1. It helps support the cost of undertaking a yard remodel to an edible backyard, and at the same time, financially supports: farmers who grow seed stock; landscape stores and nurseries; landscape contractors; arborists; and several other related businesses.

2. It incentivizes homeowners to make the switch and make a commitment to becoming micro food producers which has a significant positive impact on the environment.

3. As part of the design of the program, the credit can be taken against donations using the USDA’s fall commodity price sheet that’s published in November to set the value of the donations. So the valuation piece is solved by an existing document authorized by the government. Food banks and emergency feeding centers are already trained to weigh food by the pound for donations. Taking in fresh produce and giving back a Goodwill-style donation slip is a no-brainer.

4. Donations of fresh produce to people who need it the most helps do everything from getting people a better nutritional mix in their diets to creating better eating habits for at-risk children.

5. As a matter of domestic security - with all the food scares we’ve had from bacteria-laden foods being trucked from all over hell and gone, having a better idea of where our food is coming from and how it’s grown and handled goes a long way towards peace of mind for how safe our food supply is.

While the government is busy giving bailouts this week, it would be nice if they would also give an RFP to the people of America and empower folks to find ways to be more self-sufficient, reduce their own personal expenditures and help out a neighbor all at the same time.

A federal tax credit for gardening is a positive first step in solving our own food problems and lets us stave off the idea of eating rats as a solution to hunger in the United States.

It’s bad enough that we have to do laundry at all. It’s a total PITA to get it done, washed, folded, and put away, but then to have to pay more for laundry detergent to get it washed??? It’s enough to make me switch over to disposable clothing and edible underwear

What’s the big deal? For years, the industry standard for laundry detergent has been 100-ounce bottle for liquid (note, I don’t use powder, so I can’t speak to sizes/prices, other than to say there is some increase happening there). I am sitting on a stockpile of Arm and Hammer brand detergent that I bought last year which were 100-ounce bottles. A quick check on the detergent aisle shows me they’ve switched the bottle size to 80-ounces instead. My 100-ounce bottle says it’s good for 32 loads. The 80-ounce bottle says 51 loads. The price for Arm and Hammer has stayed relatively steady. At Walmart (which is rare for me to walk into) the price was $4.97 yesterday for the 80-ounce bottle. Last year’s price for the 100-ounce bottle was similarly priced. It’s important to note that Walmart is usually about 10-20% less than traditional grocery stores like Safeway or Albertsons for cleaners, so from quick memory, I think the Arm and Hammer at Albertsons is closer to $6.59 to $6.99 not on sale.

So, if the ounce size is less, but the load size is more, and the price is relatively similar, why is this a problem? Using Walmart’s pricing, the price in the old bottle was 4.9 cents per ounce. In the new bottle, it’s 6.2 cents per ounce. Less in the bottle, even with the supposed increase in load size doesn’t change people’s washing habits that they’ve had for years….most are still using a capful regardless of the directions on the bottle. So Arm and Hammer winds up taking consumers to the cleaners, literally! Having front loading machines and being conscientous of the environmental impact of detergent, that 100-ounce bottle does last me more than what the bottle says it will, but for general shoppers, they are pouring money into their wash machines with every load.

And it isn’t just Arm and Hammer. Tide has had a HUGE price increase in a year. Again, using Walmart prices, 100-ounce Tide was $12.83 for between 48, 51, or 64 load capacity depending on the flavor of detergent you were buying. This is up from $10.99 just a year ago, and less the year before. The 100-ounce ALL detergent - $8.44, up from $6.99. Even Purex, historically a low-priced brand was sitting at $5.97, up from $4.99 a bottle. Again, factor higher prices from your regular grocery store versus Walmart’s pricing here, and you’re paying even more than you were a year ago to do the wash.

And then of course, there’s the proliferation of concentrated detergents like All Small and Mighty professing to be 32 loads for $3.99….I have yet to get 32 loads out of that bottle, even as a conservative user.

So why the change in bottle size? Quite frankly, it’s a bulky product taking up lots of space on a truck. The smaller the bottle, the more that can ride on one semi-load. And if the price per ounce is up, but your personal consumption hasn’t changed, then the detergent companies are the only winners in the laundry wars that happen in American households everyday.

If you want to avoid being squeezed on detergent prices, some easy advice would be to stick to branded, but less marketed brands like Arm and Hammer and Purex. Tide is notoriusly expensive with dismal coupon values. Use significantly less detergent. If it calls for a full capload, try a 1/4 cap instead. What’s cleaning your clothes isn’t the soap…it’s the process of being agitated in the machine and being rinsed through the water. I mean come on, people used to beat their clothes with rocks in the river and that did the trick just fine! Lastly, don’t buy the detergent when you need it, and don’t be brand loyal. This is one item you can get away with trying to save on, unless you have some specifically weird allergy to detergents. Buying and stocking up when it’s onsale will save you from paying full price later, and switching brands when they have high dollar coupons that match the sales will help cut costs.

Key takeaway - don’t wash your money down the drain. Pay attention to the price per ounce and don’t be fooled by load size per bottle - it’s a meaningless and shameless marketing tactic.

Blame it on global warming? Well, blame it on something. Mother Nature has had a heck of a time with wreaking havoc on world food supplies this year, and the floods in the Midwest is going to be another factor in the equation as we continue to see food prices jump, particularly in the sectors that are going to be most devastated from busted levees and high flood waters….corn and soybeans.

The USDA estimates that nearly 10% of Iowa’s corn crop and over 20% of the soybean crop is damaged. We’ve already seen an estimated 20% increase in the cost per bushell of corn since the beginning of the month. And the damage estimates are conservative estimates by all accounts.

What’s troubling is that this not only has an effect on the food markets, but since a chunk of the corn being produced in Iowa was being diverted to biofuels, we’re likely to see a ripple in that market as well.

Here’s the rub though. With 2 million acres of soybean crops damaged, vegetable oil is going to skyrocket. It already was high. In fact, I had planned to do a blog specifically about how now was the time to cut that Southern fried food out of your diet since cooking oil prices were so high. A recent price check showed me that vegetable oil brands like Mazola and Crisco, both soy-based oils, were already pretty high at $5.99 to $6.29 per 48 ounces. Give this a few weeks to shake out, and I think we’ll see prices climb closer to $8 for those same size bottles. There’s no way that the already troubled market will bear holding prices at what was already a high amount when 20% of one state’s crop has been damaged. Mazola oil last year this time? You could easily get it on sale 2 for $4 and even better with coupons. Now it’s a loss leader at 2 for $8.

Corn oil isn’t much better. A few weeks ago, that same 48-ounce bottle was sitting at $6.99, so I expect that we’ll see that push even higher past $8 and possibly even close to $9 a bottle.

One more blurb on oil - your best bets are going to be canola oil and even olive oil. Canola oil is the best choice sitting at $4.69 a bottle for branded like Mazala and Crisco, and even less at $3.59 for the store brands.

So, we know that the vegetable oils are going to be even higher now, but what about other parts of the grocery store? Anticipate anything that’s corn or soy based to just be expensive. That means from cereal to tofu, American consumers are about to feel another stabbing thorn in already high prices this summer. What makes this whole thing even more frustrating is that we had such a cold winter, some farmers in the midwest never even got their crops in the ground, so there’s also acreage that went unplanted this year, which will cause some additional shortages in other grains besides the corn and soy markets.

What’s a shopper to do? Well, if you really are a large consumer of vegetable oils, grab some coupons and try to get the best deal on them now while you can. The same goes with some of the other foods out there. It isn’t likely since some of these crops were still a ways from being harvested that it’s going to affect current availabiity of supplies on the shelf at the current prices. Where we’ll really start to see that shift should be towards the middle to end of summer, and into the fall as the current crop would supply next year’s ingredient inventories. Or skip the oil and go on a diet….you could save a lot of money if the next wave of food price increases comes true.