Implications of Food Price Inflation Far-Reaching

Various causes of the volatility in food prices were explored in a panel moderated by Food Institute President, Brian Todd, during the National Food Policy Conference last week in Washington, DC.

Various causes of the volatility in food prices were explored in a panel moderated by Food Institute President, Brian Todd, during the National Food Policy Conference last week in Washington, DC. 

Panelist Elaine Waxman of Feeding America described the current food price situation as a perfect storm where, still hurting from the recent recession, a growing number of people are turning to the Feeding America's network of food banks to get by. She stated that more than half of the food bank visitors use the service for six months to one year. "Unemployment and poverty rate won't return to pre-recession levels for many years. This is the new normal," Ms. Waxman said to more than 100 conference attendees present during the panel.

Andy Harig, of the Food Marketing Institute offered insight on how retailers are trying to increase finished food prices at a time when, to cope with the earlier recession period, customers have already traded down on foods they purchase. Now, Mr. Harig stated. "There is no buffer to adjust to food price increases" the customers see in grocery stores. Competition has increased and people can find food at more outlets, Mr. Harig observed. To keep customers, some traditional grocers use a loyalty card program that gives discounts on gasoline - another trigger of higher costs of food production. Also, Wegmans promised not to change prices of the 40 most shopped-for items. "The locked-in price on staples," Mr. Harig stated, "creates stability on what people buy most often."

A domestic to global perspective was explored in discussing the impacts of the rise in food prices. Economist Ron Trostle, of USDA's Economic Research Service, addressed overall global trends in agriculture volumes and prices including a variety of factors that contribute to volatile prices in the marketplace. Bucking one line of thought, Mr. Trostle downplayed the impact of speculation on food prices. "Futures markets have a buyer and a seller, and they have to agree on what that prices will be at a certain point in time," Mr. Trostle explained. He added that if speculation plays a role, it is relatively minor. "Where speculators can play a role [is] in intra-day price movement or multiple day price movements," but the impact is not longer than two weeks, he estimates. 

Panelist Eric Munoz, of Oxfam, went to the horn of Africa to explain areas of agriculture technology improvements. In that region, which faces severe weather that impacts farming output, small-scale irrigation facilitation is a priority for Oxfam. A U.S. government initiative, Feed The Future, has a focus to increase investment in overseas agriculture development. Though it is not a new struggle for farmers in developing countries to meet their nutrition and food needs, Mr. Munoz acknowledged, an upside of rising food prices holds promise of higher profit for rural farmers. "There are some potential upside effects to higher food prices but they're only upside affects if farmers have the ability to respond to higher demand," Mr. Munoz stated, noting the focus of improving technology in food production.