The Shopping Cart Economist

I am the world’s worst blogger. Sorry, I know it. I should get back in here more often, but with what’s going on in the world health environment it was a really motivator to get in here and blog today.

First, let’s talk about flu. It’s important to note that flu is passed by coming into contact with a sick individual through the mouth, eyes, or nose transmission. (That means cover when you sneeze please!). In this case, the flu is suspected to have been caused by animal to human transmission (hence the “swine” in Swine Flu).

It’s then even more important to stress that you will not contract this flu by simply eating pork. (And no, I am not going to get into all the religious implications about some religions and their thoughts around eating pork).

But this does have an implications for your wallet. It means that you’re going to find pork on sale through unadvertised specials. It’s the product of pandemic hysteria around H1N1 “swine” flu. So even though you won’t get swine flu eating pork, it doesn’t matter, the perception is already out there and stores are going to have to contend with it in order to move inventory.

Industries that are affected from bad press tend to mark down their products as a way to combat negative publicity. We saw this a few years ago with all the hype around Avian flu. Poultry prices fell. And we saw it recently with peanuts, where Skippy and Jif slashed prices and put out high-value coupons to both move the inventory and to let customers know they weren’t going to get salmonella from eating jarred peanut butter.

So if you haven’t already seen cheap pork in your supermarket (cheap being $1.49 or less per pound) you will. And it will be a good time to fill your freezer.

I do feel sympathy for the pork industry overall because animals, like people, get sick. It is what it is. This flu has nothing to do with quality or safety of the meat itself (although I would imagine that cleaner, safer facilities could have positive impact on limiting transmission). The media has done a good job trying to convey that eating pork won’t make you sick, and many countries and even the World Health Organization (WHO) feel that the pig is being maligned unfairly. And rightly so. It’s not the animal’s fault - it’s just how illness works.

That said, I am going to plug the US Pork Industry and those who work in it. This is a good wake-up call to get a better sense of where your food is coming from and ask questions about its origins. We do have many responsible pork producers in the US. And the USDA does a decent job overseeing them. In an already tough economy, it’s not a time to let this industry fall because of what’s going on with this flu.

However, I have to say, I am going to be skipping the imported varieties. So as an example, Safeway has imported pork baby back ribs on sale for .99c a pound starting tomorrow. Sounds like a good deal, right? They normally retail for $3.99-$4.99 per pound when they are produced in the US. However, these imports come from China. All I can say is “bleck". Seeing as how I am pretty much on a boycott of any foods directly imported from China, I’m going to have to pass on these, swineflu or no swineflu. And of course if I’m going to buy pork, I’m going to buy as locally as possible.

As a bit of humor, I’m reminded of an episode of The Simpsons where Lisa decided to become a vegetarian:

Homer: Are you saying you’re never going to eat any animal again? What about bacon?
Lisa: No.
Homer: Ham?
Lisa: No.
Homer: Pork chops?
Lisa: Dad, those all come from the same animal.
Homer: Heh heh heh. Ooh, yeah, right, Lisa. A wonderful, MAAAGical animal.

Ultimately, if your family likes pork, it’s going to be a good time to buy it, stock up, and save money. You won’t catch the flu!

For those that haven’t been followed this blog, I’m not a real economist. I just play one on the internet However, I do read a wide variety of publications and I see common threads between them, but the problem is, no one has woven them together to see a pattern.

I would have done my grocery price predictions for 2009 last month, but really, I’ve needed some time to mash together a handful of independent conversations to come up with what I think food prices are going to do. So before I make my predictions, let me string these problems together and paint a picture for you.

Problem #1 - Water shortages in California will diminish crop yield and livestock outputs. It takes lots of water to grow produce and raise livestock. California farmers are facing a water shortage that’s in its third year according to the California Department of Water Resources. That means that if water’s not as easily available as it once was, California, as the nation’s largest agriculture state, is going to have a rough growing season and therefore, smaller quantities available for market.

Problem #2 - Cost of agriculture inputs (fertilizer, land, feed, etc.) cost more than the current commodity prices are going to yield growers. If a farmer is upside down in their farm assets and it costs more to grow or raise the products than will be fetched at the market, odds are high that farmers will hold back this year and take less risk. Strike two for less outputs into the market.

Problem #3 - Farmer’s access to credit is shot. Most farmers leverage debt to finance the season, and pay the debt back at the end of the season. Especially with the cost of inputs being out of whack, many farmers are struggling to finance this season which means they’ll be farming less than in previous years. Again, the finished goods into the market are going to be diminished.

Problem #4 - The average age of a farmer in the US is over 60-years old. We’re not doing a good job as a country raising up new farmers behind the old ones and the cost of entry into the industry is nearly cost-prohibitive. With farmers beginning to retire and no one to fill their place, we’ll see more farm land being resold and converted for other use besides agriculture.

Problem #5 - There’s a train wreck coming in our food supply. We’ve seen it most recently with the Peanut Corporation of America. The government’s immediate response will be reform. While that is certainly a good and welcome thing, knowing our government, anything they come up with will be a knee-jerk reaction that will cause compliant manufacturers who do take care hassle and headaches getting their goods to the grocery stores. That will increase the costs on the store shelf.

So, what does it all mean? Right now, we’ve seen a decrease in some goods because the commodity prices have fallen. But looking towards the end of the year, if this perfect storm comes to fruition, then we’re going to see food prices even higher than we saw them in 2008. The problems outlined above both decrease the amount of goods in the system, and increase the cost of the goods that do make it to market. That means overall prices will jump through the roof.

At this point, I’m going to hang off from looking at individual commodity prices because I want to watch this a little longer. But if I had to offer a bit of advice now, I’d say stock up on the things your family eats before the prices jump back up; plan for your own garden (or container produce); and hunker down for the storm.

Mr. President, I’d like to take a moment to welcome you to your first day on the job. You’ve had the position for less than 12 hours, and already, you’ve delivered several speeches that spoke of your goals for the nation, and the world around us.

In all honesty, though I did not vote you into your new position, even I can appreciate the magnitude of the mess you are walking into today. The economy is in a shambles. The stock market fell even as you celebrated. Once strong retailers like Circuit City, which laid off 34,000 people this week (as you prepared for your new job), are now defunct and on their way to becoming a case study in a business textbook. As the wife of a soldier facing a deployment this spring, I can hope that you’ll take care with our military and guide them out of the Middle East safely.

But as you enjoy what has been an impressive first day, and as you prepare for the overwhelming challenges of the coming months, I hope you’ll keep your eye turned to the parts of government that might be easy to overlook in the face of multiple, mounting crises.

The famed chef Alice Waters implored your wife to consider an organic vegetable garden at the White House. While Ms. Waters dedication to healthy eating is to be commended, tilling up the White House lawn to plant a garden would be a token gesture. I would ask that you look at the broader issues surrounding food and agriculture policy for the country.

In this term, government agencies like USDA and the FDA need your attention. Our US farmers are struggling terribly right now. The change in the economy is threatening our food production. The average age of a US farmer is between 60-65. A younger generation needs to be encouraged to farm and be rewarded for the thankless task of feeding this nation. Economic policies should be reflective of individual efforts by non-farming Americans to grow food for themselves, their families, and their community.

Reuters News Service reported last month that one in 10 Americans is participating in the food stamp program. More than half of the nation’s children require food assistance through child nutrition programs. In my state of Oregon, we have some of the country’s highest levels of hunger. The Oregon Center for Public Policy’s 2003 survey found that one in five with hunger insecurity will consider suicide as an alternative to going without food. One could presume that statistic is not an anomaly to my state alone.

As a nation, we cannot expect to go forward from today and continue to be a consumer society. We’ve learned the hard way that our need for material goods has been our Achilles heel. We’ve lost our manufacturing capabilities in most market sectors. Food production is still the one thing we do well. In your speech today, you reflected that we will help the world’s poor to farm and clean their water.

Sir, please understand that while 10% of our country requiring government aid for food pales in comparison to the need in third-world countries, we’re walking down a path with our food policies and lack of support for our food agencies that could have devastating results. Our own struggles with water are on the horizon. California farmers are already preparing for a less productive harvest this year due to anticipated water shortages. Our challenge won’t just lie in teaching our neighbor in another country to farm his land, but if we cannot continue to produce and export our agriculture products, our neighbor will surely starve, and many Americans will starve beside him.

President Obama, while financial crises, mortgage meltdowns and a war on two fronts will be top of mind for you tomorrow, please remember that a “back to basics” mindset will be what pulls this country up out of the mire. A child cannot learn and become the next great inventor, businessman, or leader if he sits in his chair at school hungry. Back to basics in 2009 should include funding and building agricultural infrastructure and developing food policies that will sustain my children and the global neighborhood for years to come.

I wish you good luck today as you start your new position. I hope that when 2012 rolls around, you’ll have delivered the hope and change you promised. Your daughters, my sons, and the world will depend on it!

Last December, I started the Shopping Cart Economist because I’d seen the writing on the wall for what was happening in the food market globally, and it didn’t look good for consumers.

I made some predictions for 2008 in specific categories and while I’d like to pat myself on the back for being right on in nearly every category, the sad thing is, I was right on in nearly every category - food prices did nearly exactly what I thought they were going to do, which was a bad thing for American consumers.

If you missed the blog post, you can read it here. But, here’s some highlights of what I predicted for 2008, and what really happened. *Note - these are non-sale prices.

Soda - due to the increase in the main ingredient, corn syrup, my thought was that a 2-litre of soda would hit $1.99 this year. 2-litre bottles sat forever at $.99c and this year, not only hit $1.99, but in some stores, I saw it as high as $2.19. The price of a retail 12-pk of coke right now? $6.59. A gallon of soda now costs more than double that of a gallon of gas, and nearly 1.25 times a gallon of milk.

Milk - My prediction was going to be that it would hit or come close to $4 a gallon. This summer, milk was astronomically high. A gallon of 2% store-brand (lucerne) from Safeway was $3.89 - just shy of that $4 a gallon mark. That’s not to say milk isn’t used as a loss leader for many stores, but to walk in and get a gallon with no coupon or sale, the retail price point was the highest I’d ever seen it.

The bigger shocker was in the price of dairy-processed foods. The most notable, which I was not expecting, was the price of Kraft Philladelphia Cream Cheese. Once easily available with no sale for $1.99 for 8-ounces (and always on-sale for .99c each), Kraft Cream Cheese in my neck of the woods had a retail price of $3.59 for 8-ounces. Talk about a jaw dropper - that’s a 55% increase in one year. Most branded icecream went to $6.59-$6.99 per half-gallon (which is really not a half-gallon at all - it’s 1.75qts), string cheese, for packages that had cost $4 at the beginning af the year went to nearly $9 a package. And the biggest kicker for me, Tillamook cheddar 2-pound baby loaves of cheese - $11.99 from $9.99 with the holiday sale prices only falling mometarily to $5.99 instead of the historical $3.99 for 2-pounds.

I have to say a big THANK YOU to the pork farmers of America. They managed to hold prices throughout the year on fresh pork products, and my hypothetical guess on this is that with beef prices as outrageous as they were, they managed to increase their market share with many people converting from beef to pork as a protein source. However, processed pork products had a pretty steep price increase for things like packaged bacons, sausages, and sliced deli ham. Sliced luncheon meats in general were astronomically priced this year with the generic store brands reaching as high as $7.99 a pound for sliced deli ham.

Eggs - as predicted, the price of eggs climbed, and we never saw relief even at times when egg prices normally fall (think Easter and other “baking” type holidays). Normal retail price for eggs could be seen as much as $3.29 a dozen, and even eggs at discount places like Costco were abnormally high. And cage-free or any of those types of products? Forget about it! There was no way I was paying over $5 for a dozen eggs - I’d rather build a chicken coop in my backyard. Which, ironically, people actually DID!!! In fact, this year, the price of eggs sent people to community egg co-ops where they joined in to raise their own eggs for less per dozen than they could be had at the store.

Grains/Breads - Sadly, we’re not going to come out of this, and what happened with bread/grain increases is just a foreshadow I believe into prices next year. Store brand generic white bread doubled in price to $1.99 retail, with brands like Sara Lee, normally the $1.99 price point, jumping to $3.69 per loaf. And specialty breads? My favorite french, La Brea, was $5 a loaf. Specialty flours and organic varieties were particularly hurt hard by price increases, so the cost per loaf for some breads crossed the $6 mark.

And cereals? Well, I hope you all took note of how General Mills came through for us with a 10-ounce box of cereal at the same price as what the 12-14 ounce boxes used to cost. $4.59 for a box of Quaker Oatmeal? I don’t hold much hope for the big Quaker sale that’s normally happens in January. I have yet to see the coupons for it, and I don’t believe we’ll see much under $2 a box on sale.

Beef - After a year of crazy beef prices with prices I’d never seen before, the Christmas ribeye in 2007 that failed to fall below $5 was back to its 2006 prices of $3.98 (yes, I stocked up!). The beef market has been hit hard by the economy. At one point, people couldn’t afford to buy it, and prices of fallen. But the beef industry is hurting as their costs of production are more than the price they are receiving for it at the market. And yet the price of a pound of ground beef in this morning’s ad was still $3.99 for 93% lean ground beef. Overall, beef prices climbed to a point that most Americans are still going to have a hard time affording.

Produce - my prediction was that we’d see more local produce in the market. Even I became my own producer this year thanks to George W’s economic tax stimulus rebate. But one of the things I’d mentioned was that local wasn’t going to mean the farmer’s market, rather, more stores would be buying local produce. Safeway and Albertsons in my area went as far as relabling their produce signs in the department to show country (or city/state) of origin on the produce. They’ve made a big fuss over buying local. And even Wal-mart, the store with connotations of outsourcing and killing local economies, is now the largest purchaser of local produce in the United States. And the local produce was priced right. If you were lucky enough to live in a market with good local produce production, prices for things like Gala apples (.68c per pound) and cucumbers (2 for $1) were the best deal going this year.

Sadly, as the world markets crumble around us, the food market is the only thing that seems insulated against falling prices which is bad for an American public in a time of financial crisis. More people have food access issues than ever before, with the highest number of Americans on food stamps ever happening this year.

I’ve got some predictions for next year’s prices which I’ll try to get posted here in the next few days before the new year, but I don’t think it’s going to be pretty.

Another year seems like it’s coming to a rapid close. For many, the year hasn’t been all that bright as we’ve seen gas over $4 a gallon, salmon as high as $30 a pound, food prices rise higher than inflation rates, global food shortages of rice, wheat, and other commodities, and global food scares. My kids’ idea about raising a cow in our side yard is looking better and better as beef is expected to climb to as high as 30% next year on fears that there will be grain shortages and the cost of feed will be outrageous. Then of course, factor in a global recession, an economic meltdown of record proportions, and pull back in consumer spending….the result is that food inflation is going to continue to grow disproportionately in the coming year. Quite frankly, and not to be a doom and gloomer, I think we’re in for a rough ride for the next several years where food is concerned.

Ironically, some of the same conditions that caused prices to rise are causing deflated prices in some food sectors. Beef, for example, is costing producers more to produce it that they are selling it for at market. But while a few market producers are facing supply cost challenges, we’re going to see some other things that will keep food prices inflated overall.

The big one that has me bothered going into 2009 is a water shortage in California which could have produce growers there on the ropes. California is one of the largest agriculture economies in our country. If you’ve never driven through the I-5 corridor between San Francisco and LA, you’re missing an amazing sight. No, not that it’s some beautiful stretch of land, because it isn’t. What’s amazing about that stretch of road is how they’ve converted an otherwise arrid desert into viable farm land by importing in an ocean of water to make food grow. Everything from lettuce to tomatoes to carrots and assorted fruits grow in that strange part of the land. Like flying over the midwest where you look out the windows and the ground below looks like checkerboards, driving through this part of California is the same type of experience….except that it’s patches of beautiful green farmed acreage mixed with desert and greenhouses.

It’s disconcerting that so much of our produce comes from this part of the US, and how with enough water, the crops can be forced to grow there year round. But with water shortages looming (not to mention labor issues in CA), I think we’ll see higher produce prices than we ever have. I found it ironic that one unnamed produce producer of bagged salads posted 10% profit increase with only a 1% increase in production. It means that between prices increasing and package size decreasing, food companies are managing to find a way to ride out the economy on the backs of consumers. Just a bit of food for thought the next time you pick up that 16.3-ounce jar of Skippy that once used to be 18-ounces.

Unfortunately, I don’t have any magical answers for consumers on how to combat rising food prices other than what we preach over at Hotcouponworld.com. Where I think we’ll see offsets that keep our households balanced is by leveraging the deflation on other parts of the economy. Gas is at a low not seen in 58 months. Consumer electronics, household goods, electronics, and just aboput every other product imaginable will be more affordable than ever as retailers work to stay afloat. But, we can’t eat laptops and digital cameras, so shop wisely.