Covering high cost of food is complicated

By Susan Salisbury

Palm Beach Post

With food prices receiving more coverage than ever as they continue to escalate, reporters need to be careful not to over-simplify the reasons behind the increases.

That’s the message Chip Flory, editor and publisher of Pro Farmer magazine, and Greg Johnson, editor of The Packer, a produce industry newspaper, shared during the session “Pantry Panic: Covering rising food prices” with moderator Bill Allen, director of agricultural journalism at the University of Missouri, at SABEW’s fall workshop earlier this week.

Flory, who covers commodities such as corn, soybeans, wheat and cattle, gave the following tips:

1. Don’t place blame on one factor for rising food prices. There’s never just one reason, Flory said. He used ethanol as an example of one of the most recent popular culprits. “Everybody was pointing at ethanol,” Flory said.

But what really drove up corn prices was the drought-impacted wheat market. When China and the Middle East could not get enough wheat, they began importing more corn.

U.S. corn-based ethanol production also was blamed for the Mexican tortilla riots, but the corn used in tortillas isn’t the same type of corn.

2. Keep in mind that everything is connected. For example, the recent plunge in pork prices is tied to the salmonella outbreak linked to a Mexican jalapeno.

How? After the jalapeno was identified as the source, U.S. inspectors found “non-routine” or sanitary violations at several Mexican pork plants. Then Mexico decided to refuse shipments of fresh hams from the U.S.

“It’s turned into a trade issue,” Flory said.

3. Don’t bite on the first answer a food company gives you for higher prices. “If they say it’s due to ethanol, ask about the cheap dollar,” Flory said.

4. Understand where food comes from. Two years ago, it cost $300 to $350 to produce an acre of corn. Now the costs are $700 to $800, due to increases for fuel, labor, fertilizer, seeds and machinery.

5. A reporter’s last question for a food company should be this: “If prices are up due to input costs, will prices go down when inputs decrease?”

Johnson explained that fruit and vegetable prices are based on supply and demand.

However, the “sell it or smell it” market is also impacted by costs such as:

1. Fuel costs for getting produce to market.

Most produce is shipped by truck. Earlier this summer, the cost of hauling a load from California to New York rose from $8,000 to $10,000. Now it’s about $7,000 a load, and last summer it was just $5,000.

2. Land prices.

Produce comes from where it is warm, such as California where land is expensive. “Salinas is where the majority of our vegetables are grown,” Johnson said.

3. Government regulation.

4. Food safety measures.

5. Input costs, such as fuel and fertilizer; growers’ costs are up 14 percent from a year ago, Johnson said.

6. Retail markups.

Markups can be anywhere from 10 to 100 percent. For example, strawberries are currently $8 to $9 an 8-pound flat, and typically sell at retail for $1.99 a pound.

Despite the ever-rising costs, some produce is still cheap for consumers, Johnson said.

“Potatoes will be a little higher this year, at $3 for a 10-pound bag. It is literally cheaper than dirt,” Johnson said. “You can still get a lot of bang for your buck at the grocery store.”

Posted Sept. 11, 2008