The Shopping Cart Economist

May is typically a month I look forward to because it means fresh fish right out of the ocean. Fish is one of the healthiest animal protein sources, and one many Americans just don’t get enough of in their diet. Price is always the biggest factor for most shoppers as it relates to consumption. If fish is expensive, people will pass on it and look for cheaper protein sources.

However, Alaska fish are starting to run. May marks the beginning of King Salmon and halibut seasons. That means that there will be fresh goods heading to a store near you. It also means that previously caught salmon from last year’s season will be on sale. But, those sales aren’t going to last very long. If your family is a big consumer of fish, this might be the week to fill your freezer. Here’s why….

With the oil spill off the Gulf of Mexico, the Gulf seafood market is at a stand-
still. The US government imposed a 10-day ban on fishing in the Gulf as they assess what kind of risk, both current and long-term, the oil spill will have on the health of not just fish and wildlife, but on those who consume Gulf coast harvests of fish, shrimp, and oysters. According to NOAA, the National Oceanic and Atmospheric Administration, the Gulf Coast fishing economy harvests about one-billion pounds of seafood a year. A 10-day ban on fishing is essentially 27-million pounds of fish that are going to be out of circulation. It’s not clear that the ban will be lifted after 10 days. So for every day Louisiana fishermen’s boats are out of the water, an average of 2.7M pounds of fish will not make it to US grocery stores.

As existing inventories get used up and supplies are depleted, it will likely put pressure on other regions like the Pacific and Atlantic coasts, as well as imports from Thailand and China, to fill the shortages.

It’s early into a catastrophe like this, and the oil spill drama is still unfolding. Scientists and fishermen alike can’t predict how the region and the fishing economy are going to be affected. It won’t be until they come out with some clear damage assessments that we’ll begin to see “shortage” reports on the news. So, in advance of what might be a likely outcome, my suggestion if you’re a big fish-eating family would be to bank some now in your freezer.

What to buy? Look for deals on sockeye salmon. Whole salmon is always a better deal than fillets. Buy the whole fish and have them cut/wrap the fish for free instead of buying the higher-priced, pre-cut fillets. Avoid farm-raised Atlantic salmon, even though it might be a bit cheaper. Wild is better for the fish runs, and better for you.

It’s also a perfect week to shop for seafood, because with Mother’s Day right around the corner, many chain stores advertise fresh seafood for “surf & turf” dinner promotions. That means there are fish, scallops, lobster tails, and shrimp on sale that were planned and ordered well before the oil spill in the Gulf.

It’s clear how one incident like a single oil spill can have far-reaching implications for those of us who might otherwise feel no connection to such an event. Sadly, in this instance, an oil spill thousands of miles from many of our homes isn’t just going to affect the environment, or the livelihoods of those who fish the Gulf Coast, but the consumers. In this economy, many people are already struggling to put food on the table. If the price of seafood likely climbs as a result of this disaster, a healthy protein source for many families will soon be out-of-reach.

If one natural crisis causes a 30% drop in agricultural production, and another natural crisis causes a 20% drop in ag production, does that mean we’ll see 50% less food production in the affected sectors?

I’m not sure if the math really pans out that way, but I think there is cause to believe that the price of produce, and in particular, fruit, is going to be higher this year than normal.

Two recent headlines have captured my attention around crises of nature that are going to affect fruit growers, particularly on the West Coast, where a huge variety of everything from berries to citrus is grown. Interestingly, what I haven’t seen is the math that links the two concerns together.

The first was an article about the fourth year of CCD - Colony Collapse Disorder - the unknown malady that is affecting the world’s honey bee population at a startling rate. Honey bees are one of the biggest forces in agricultural production. Without these hard little workers, nearly everything we eat would in some way be affected, including some of our proteins like beef. A drop in production would mean an increase in overall price of the foods we eat. It’s been said that bees have increased the value of US agriculture productions in the billions of dollars.

The second article was about how an Asian fruit fly has made its way to the US and its decimating fruit crops at the almost-ripe and ripe stages of fruit production. This means that potentially millions of dollars of crops could be at risk because of this little critter.

So, hypothetically, let’s look at the math.

Let’s say a farmer has fruit trees that should produce 1,000 pounds of fruit. But this year, bees won’t be able to pollinate 1/3 of the fruit trees, so the yield falls to 667 pounds. Ok, that’s not great, but still tolerable. However, towards the end of the season, the Asian fruit fly decimates 20% of the 667 pounds of expected crop. The remainder the farmer has to take to market after a fruit fly infestation is 534 pounds. So, not quite half of the crop is lost, but it doesn’t get much closer to 50% than that.

The farmer has invested costs into his production for the 1,000 pounds of fruit he was anticipating. Even if he only got 534 pounds, he spent for the 1,000 pounds, and those costs have to be made up somewhere. That somewhere is going to be the consumer. Less available produce with a continued high demand will result in increased prices.

I wish I could say I’m just being a doom and gloomer, but we’ve seen this type of thing happen before, and no one talks about it, and suddenly, food prices jump and no one understands why.

So, how do you combat inflation in food prices when the culprit is mother nature? Fight back by planting a few fruit trees of your own. Even if you don’t have a yard, you can do container fruits from apple trees to blueberry bushes. The great thing about growing a few of your own is that other natural pollinators in your yard will come to the aid of pollinating your trees - wild bees, wasps, even mosquitoes. By providing flowering fruit plants, you’ll encourage pollinators into your yard.

If you plant now, you’ll have a small harvest this year, meaning, you’ll already be saving money this summer on fruits your family loves.

You can also grow organic. The Asian fruit fly is only going to be stopped with more pesticides - organic gardeners have no defense. That means there’s a good chance the chemical content of the produce we eat is going to climb, and that organics may become cost prohibitive, or, simply not even make it through the season with much to sell at all.

Lastly, you’ll be investing in your own food security. I’m beyond impressed by how tirelessly scientists are working to combat these natural food crises, but I worry it’s too little too late. By the time they’ve figured it out, reversing the process may not be enough to stop the tide of change in the agricultural landscape.

I’m not a scientist, and there’s a chance I could be entirely wrong out this. But I’m willing to bet that within 2-5 years, we’ll be just climbing to the peak of a problem with this category of food. Sadly, people already have a hard time getting fresh fruits in their diets. Most people won’t understand how an insect problem will not just change the price of what they eat, but ultimately, the availability of choices for what they can eat. Planting your own favorite fruits will help you combat what are sure to be rising price items, and give you some peace of mind that you’ll be able to continue to keep these items in your family’s diet at a price that works!

Ok, I used to play with catering, but for the purpose of this post, no, my 100-box purchase of pasta last week was not for catering, rather, for personal household consumption.

Consumers right now are being falsely lulled into a sense of calm around food prices. We’ve seen deflationary pressure on certain commodities like beef, poultry, and grains. But I think change is in the winds again, and this time, for reasons unrelated to economy and recession. Instead, I think weather and climate change are going to be the next big catalyst for the increase in food prices.

I probably was not the only person to think it was strange that last month, there was snow on the ground in 49 out of 50 US states. Stranger was the warm patch of weather that hit my area. So while it was snowing in Florida, the warm spell was forcing the buds on my Asian pear and peach trees to open early. I’m hoping with the frost we’ve had the past two days, that I’ll even see any fruit on those trees. With no bees to be found about right now, I’ll be lucky to get anything at all.

That brings me back to the 100 boxes of pasta. Pasta is a wonderful staple food. With an average shelf-life of 2 years and tremendous versatility, in my house, it’s our wonderfood. The kids are content to eat it plain, and I can sauce, spice, bake and otherwise do just about anything with it.

Safeway recently dropped its generic pasta to .99c per box from $1.49 per box. That’s a 33% decrease in the retail price. The CEO came out and said they were lowering prices because it was good for the consumer. But I have a hard time believing that because this week, Safeway (stock ticker: SWY)is trading at it’s 52-week high. In fact, most food retailers and manufacturers are all trading at yearly, and for some, lifetime record highs.

So, if the cost of food inputs from the farmer are down, and then package sizes on items have decreased, and prices have stayed relatively the same since they started climbing two years ago, then on some items, it makes sense to shave the price and be seen as a champion for consumers. While I am not going to knock Safeway or any other store engaged in this practice, the consumer advocate person in me knows that the tactic is really about capturing market share and taking profit gains while they can. If these retailers are smart, I hope they sit on the cash they are generating now because I believe we’ll see inflation hit the grocery sector in a big way towards the end of the year.

Using a buy low, eat high philosophy here, if I buy the pasta at a price lower than the shelf price - in this case, .40c per pound, when the price of pasta spikes back to $1.49 a box, which I think it will, then I’ll have profited a $1.09 per box. That’s over $100 savings. In this scenario, I’ve negated the inflation and the potential for Safeway to yield to the pressure of decreasing the pack size of the pasta, which I think would be the next step before the price on the store shelf rises back up. Most consumers will notice the price jump back over .99c, but many won’t notice a shedding of 2 to 4 ounces in the pack size.

In fact, most of the branded competitors of generic pasta, like Ronzoni, Barilla, and others, have gone to as low as 13.5 ounces versus the standard 1-pound box of pasta. Notice however, the box packaging didn’t really change, just the weight in the box.

The lady in the checkout behind me asked as I was checking out if I was in catering. I replied no. When I said it was for personal consumption, she looked at me as if I needed a straight jacket. I simply smiled, knowing that when the price of wheat climbs this year, and the retailer starts to pass inflation back to the consumer, I’ll be happily munching my stir-fried shrimp pasta for pennies on the dollar while shoppers that lack the ability to see through marketing ploys or sense inflationary danger wonder how they’ll put food on the table tomorrow.

Wow - I haven’t been back here in awhile, and I am sorry for it. I miss blogging over here, but with hubby still deployed, writing has been on a back burner. However, this topic swelled up in my mind and I wanted to tackle it because I am fascinated by what I’m assuming is the thought process behind Pepsi Throwback - made with real sugar!

In my quest to limit how much soda I drink, I’ve stopped keeping it in the house. This isn’t to say I’ve stopped buying it, but I make it a little more painful to do by buying it one bottle at a time and paying the higher cost for it in a convenience store or a restaurant.

Yesterday, I stopped at 7-11 to buy a bottle and saw they had a coupon for “Pepsi Throwback” - made with real sugar. The coupon was for a free bottle of Pepsi Throwback or Mountain Dew Throwback when you buy any two other Pepsi products.

I bought the three bottles, got in the car, opened one, took a big sip, and almost spit it out! For the life of me, I don’t recall Pepsi tasting that way. In fact, it was so much less sweet than a regular Pepsi that I thought for a moment I was drinking diet soda. The calorie count however was still the same.

Either they weren’t using enough sugar, or my taste buds have been deadened to real sugar by its high fructose corn syrup counter part.

So, putting my shopping cart econ hat on here, I got to thinking about this today. Here’s my theory on why this product is on the shelf.

Pepsi got its patent in June of 1903. So it’s not like this is some 100-year anniversary party they’ve decided to have. And Pepsi, like Coke, has been using high fructose corn syrup since the 1980s as a cheap sweetener to flavor its beverages.

The reason for the sudden interest in the old Pepsi formula (complete with the old Pepsi Wave logo)?

My unadvised answer is that Pepsi has some really good long-range planning executives on the team, as well as a CEO that sees healthy food marketing as the future of Pepsico. This is no more than a market test to move Pepsi back into the sugar-based soda market.

I think Pepsi is being shrewd and is going to recreate itself in the space of being a natural foods advocate, aligning itself with moms, nutritionists, school cafeterias, cardiologists, and a dozen-plus other lobby groups that see soda as the bane of the US existence.

I also think they see several tides on the horizon including:

* A beverage tax levied against beverages containing high fructose corn syrup - if they are made with sugar, they could avoid such a tax.

* Consumer choice - aligning themselves with consumers who are demanding products to be in a more natural state will increase market share.

* Sourcing - By switching over now, they can lock up sugar contracts at prices that make sense, and ensure their competitors don’t have access to the supplies they would need in order to compete with Pepsi.

Sugar is also seen as more sustainable than corn, which is a mono-culture crop. Switching to sugar in then a proactive business choice versus a reactive business response, which is the position they’ll be putting Coke into if this test is successful.

Pepsi is on the Dow Jones Sustainability Index as being one of the top companies on the Dow Jones committed to sustainable business practices. Changing ingredients from high fructose corn syrup to sugar would be seen as a huge step towards sustainability. Sugar, be it from beets or cane, is going to come out the better choice in the case for environmental stewardship. From a cost perspective, it will likely be beet-sugar that gets used, which will be a boon to the beet-sugar producers out there.

So, is this really just a case of nostalgia for better days gone by? Or is this really very shrewd marketing and long range planning in the works? In this economy and recession, those of us of a certain age who can recall hot, lazy summers riding our bikes, personal childhood freedoms pre-Jaycee Dugard being abducted, and seeing Star Wars at the drive-in theater 14 times, will also recall with fondness, the Pepsi Wave logo and what was inside the bottle before the chemical cocktail we have today. If there was ever a time to recapture those consumers, it’s going to be right now. Maneuvering the generation behind me who grew up with blue cans instead of glass bottles might be a bit harder, but if Pepsi can swing it, this just might give them enough edge to win the cola wars once and for all.

Although I am a sucker for the Red Can - chemicals and all - with a move like this, I’m putting my money on Pepsi!

Silly title, I know, but I’d like to convey that the size of the package does not correlate to the overall economic value of what’s inside the package.

Case in point, the watermelon. It’s my family’s favorite summertime fruit. It’s low in calories, has basically no fat, and it seems to do a great job keeping me hydrated. Here’s the problem though.

For years, I’ve resisted the personal-sized watermelons marketed by Dulcinea. $3.00 for a personal watermelon seemed excessive for a 3.5 pound melon when a large seedless watermelon could be had on sale for .39-.49c per pound on average - and sometimes even less!

So I bought my .39c per pound watermelon. The average large melon seems to range between 12-15 pounds, so for .39c per pound, the average cost of a large seedless watermelon is about $5.25. That’s nearly 10 more pounds than one of the personal Dulcinea watermelons. Great deal, right? Well, maybe not so great.

The next part of this is my unscientific, unproven (yet quasi-tested) musings about why that thinking might just be wrong.

When you have a 13-pound watermelon for $5.25, the average large variety watermelon is about 60% usable. The rest is rind weight you’re paying for. That means the usable portion is about 7.8 pounds. That brings the usable portion of watermelon up to .68c per pound. The Dulcinea is about 95% usable, meaning that for a 3.5# personal melon, your rind waste is about .12 of a pound. That’s roughly .88c per pound for usable melon.

Now that we’ve taken the rind out of the equation, the price difference between the two melon types on a pound per pound basis is only about .20c difference.

Let’s take this a few steps further. You now have 7.8 pounds of watermelon. Cut watermelon doesn’t last well much past a week. So unless your family can crank through it before it goes bad, it will wind up in the trash. Plus, in my experience, the larger the watermelon, the greater the tendency to have a mushy, stringy center that you wind up having to cut away and toss. The usable fruit that you toss in this process will increase the overall cost per pound.

If you’ve ever cut up a large watermelon, you’ll know how much trash the rind can generate. If you are cutting up that 13# watermelon, you’re left with about 5.2 pounds of waste. Unless you’re composting (and rinds take quite a while to break down), then you’re filling up your trash can faster after you buy a large melon and cut it up. Watermelons are over 90% water. The larger a melon is, the more resource-intensive it is to grow.

So for those interested in the real cost of food, who think about food miles and where their food is coming from, this is where the smaller melons make up the difference in the price per usable pound. A semitruck typically can lug forty-four thousand pounds of food. The larger the melons, the less of each unit will be on the truck. A large-melon truckload will likely generate more overall waste due to the rind weight.

The smaller melons will hit more people’s tables. They were less water intensive to grow, and they theoretically generate less waste. When you add in these other factors, which most people quite honestly don’t, the smaller melon truly does become the better deal with regards to the total economic value of what you’re buying.

A watermelon makes for a great example to illustrate this point. But it also holds true for things like cereal and bags of chips and caseload goods from big-box warehouse stores. The bigger packages aren’t always the better deal. Sales in your local grocery stores more often than not have better deals on a price per ounce/unit basis. What these bigger pack sizes do is provide convenience, but ultimately, as in the case with the melon, you might wind up paying more for the hidden costs and the loss associated with the waste than had you just bought the smaller, usable pack size in the first place. The perception of spending less to get more could actually cost you more in the long run.