The Shopping Cart Economist

So, we’re you one of the first crop of US Taxpayers who were slated to receive an economic stimulus rebate check? 130 million US households are eligible to receive one between now and July. The average household in my state (Oregon)is slated to get on average $885.

Now that you have it, the question is what to do with it?

For many Americans, the choices are obvious. Spend it on a want, save it for a need, or pay doubt the never ending cycle of debt. For others, the economic stimulus dollars is going to go towards keeping afloat or buying household necessities.

Having given this a lot of thought, I have an alternative suggestion for people who are worried about food prices and would like to stretch this rebate check for the long haul (an no, I don’t mean stocking up on rice!!!).

Background:

Early this year as I started blogging about food prices, my hubsand and I had a conversation that changed the look of our yard. We own our home and we don’t plan on going anywhere. But we have been bothered by food prices. So we made the decision that we’d invest in our yard to combat future food prices and solve our food needs.

For $783 we bought and planted….

3 apple trees
1 peach tree
1 pear tree
1 cherry tree
1 almond tree
1 pair of kiwis (it takes a male and a female to get kiwis)
1 grape vine
14 blueberry bushes
7 huckleberry bushes

For a little more, we later picked up a Washington navel orange tree, a key lime tree, and a Meyer lemon tree (we’ve already had almost a dozen lemons and more on the way!!!).

According to the plant FAQs on each tree, if I were to add up all the potential fruit that I could grow in a year, my new little suburban orchard could yield 1000 pounds of fruit in any given year. Yes, I said ONE THOUSAND POUNDS!!!

Ok, I am sure you’re wondering what they heck I’d do with that much fruit each year. Before I answer that, let’s look at the economics of growing my own fruit.

Current fruit prices (note, not sales prices but retail):

Apples - $1.50 to $2.00 per pound
Pears (Asian) - $2.50 to $3.00 per pound.
Berries - $4 per pint (about 4-6 ounces)
Kiwi - $2 a pound
Grapes - 2.99 a pound
Almonds - $5 a pound
Meyer Lemons - .99c each
Limes - .79c each
Oranges - $1.99 per pound

So, let’s take the low end of the spectrum and say that in a full production year, I’ll have 500 pounds of usable fruit at an average of $2.50 per pound. That’s a whopping $1250 of fruit that my yard can produce annually. Over a 10 year period, (keeping it simple and not assuming any inflation) my $800 investment will yield me $8750 of value. That factors in the notion that years 0-3 will be semi-non producing (although I will get lots of berries this year!!!). That same investment in a compound interest scenario at an 8 percent return over 10 years will only net $1700. So there’s true financial value in cultivating food for your family with your economic stimulus rebate.

Now, back to what I might do with 1000 pounds of fruit a year. With rising food prices, one of the things that everyone can do to economize your family’s budget is to plant food. I’m not a huge environmentalist, but there are some significant impacts in making this kind of conversion in landscaping. It reduces dependance on fruits coming from far away, it allows people to eat in season, and it allows new channels for food to move through the local food economy. For my own purposes, I plan on sharing with neighbors, allowing the people who walk the neighborhood to pick as they stroll by my house, and most importantly, I can contribute fresh goods from my yard to my local food bank. With a little preservation and planning, we’ll be enjoying fruits from the yard all year and saving big bucks at the store.

The other upswing of this scenario is that people would actually meet the intent of the economic stimulus package in that the money would be immediately channeled into the economy, supporting local nurseries, and wages for people who come out and do the planting (if you’re not much of a green thumb, this is the way to go).

So while that vacation might sound fun, or socking away for a rainy day seems sound, planning for a change in the global food economy might be a better bet.

For those of us who pay any measure of attention to packaged goods, we’ve seen this for years….manufacturer’s changing pack size and holding prices the same, effectiving increasing your cost per ounce, per pound, per unit, etc.

Frito Lay came out this week and said it will be changing the volume in a response to keeping prices down. But how does this solve anything? It’s actually more damaging on several levels to put less in the bag and charge the same price.

It doesn’t acknowledge the fact that prices are going up on everything from basic staple like rice and wheat, to your favorite cookies and beverages. And for the environment, it means more packaging because now I have to buy 2 items to get at least the same amount that was in the former size package.

Salad mixes are terrible about this. Salad mixes used to be sold in the 16-ounce package. Brands like Fresh Express and Dole have been shedding pack size now steadily over the past two years. The one-pound generic garden salad is now 12 ounces. The specialty blends are even less. The price? This week, the chicken salad kits produced by Fresh Express were “on sale” 2 for $7. Where’s the deal? Buy a head of lettuce and cook your own chicken already.

While companies may be fooling a majority of consumers, they won’t fool all of us. What can you do to combat this? Write the companies and ask that they leave the pack size alone. If they have to make price increases, we get it….everything’s in a state of price increase right now. But be honest. Put out a press release and address consumers honestly.

Frito Lay: “The cost of potatoes and fuel costs have changed our costs, so we need to adjust our pricing. If and when the market becomes stable, we’ll work to reduce the prices as we can. We value your business; thanks for hanging in on a bumpy ride with us!!!”
Seriously, how hard would that be? As a consumer, I would appreciate that more than being tricked by a brand who wants to give me 4 less Pampers or Huggies, 3 ounces less Maxwell House, 1.7 ounces less Fruit Loops, or 4 ounces less salad.

I am just not sure what it’s going to take for this country to acknowledge that cheap food is no longer cheap, that we’re at the end of an era of cheap food, and for companies to rethink their strategies about marketing and places that are cost centers in their business models that they can reevaluate pricing effectively.

Wouldn’t it be novel for a company to say…"Here’s our brand. We’ve slashed marketing costs and stupid promotions to give you the best net price at the store, all day everyday because it’s in your best interest as our customer to do so.”

I’m thinking they can build some pretty strong loyalty that way. I don’t need 1 sheet of Bounty Paper Towels mailed to me in a home mailer attached to my newspaper with a cardboard insert (read - expensive marketing campaign) so I can learn about a product with fewer paper towels that costs me more money.

Moral of the outrage? Pay attention to what you’re buying and speak up to companies so they know we’re done of these marketing practices and ready to have a real conversation about what food and household products cost.

I’ll be honest. While I am not an alarmist or a survivalist type (we didn’t stock bottled water or candles for Y2K) I have been long worried about the impending implosion in the world food markets. And while Shopping Cart Economist was designed to track US prices, one can’t help but look outside over the fence to see that world food prices are having a huge impact at the store here at home.

So when Costco and Walmart both announced this week that they are rationing customers for rice, wheat and oil, one has to wonder what kind of information their buyers are privvy to and why they are stemming the flow of goods into the market.

Well, what is known is that India has limited rice exports, Vietnam has completely banned them, and people in the Phillipines are being jailed for hoarding rice. And Thailand, the world’s largest rice exporter, is debating on restricting exports.

The cost of rice has basically doubled in the United States in the past month. A 2-pound bag of rice at the average grocery store for a brand link S&W is upwards of $3. Big bags at warehouse stores are running $22 or more for a 25# bag depending on the varieties. With coupons, I bought 3 bags of rice for $1.69 each, so .85c a pound for the best sale I could get on the California Jasmine variety I like.

Rice, a premium staple for most of the world, has nearly tripled in price in the past few years. The World Food Programme estimates that to put out as much food as it did last year to help poverty-stricken countries, it’s going to need over $750 MILLION dollars just to keep up with food cost inflation.

The US does grow rice. In fact, Riceland Rice is one of my favorite brands. According to the USDA, US rice production is only 2% of the world production, yet because we are considered the “bread basket” of the world, we are considered to be the 4th largest exporter, which means most of the countries that grow rice do so for domestic consumption. US rice only accounts for 45% of our own consumption, and we rely heavily on other countries to export rice into the US. Sadly, as a market for other grains has emerged (think bio-fuels), we have less domestic acreage tied up in rice production. So if the world cuts us off from rice to deal with their issues with hunger at home (appropriately so), we’re going to be short here.

So, just some thoughts that don’t necessarily tie to the store prices, but have bigger implications….

There are over 40,000 Chinese restaurants in the US according to NPR (and that doesn’t include other Asian varieties like Thai and Vietnamese, etc.). If rice becomes widely unavailable in the coming months where does that leave the restaurant industry? Many mom and pop restaurants rely on warehouse clubs for bulk supplies. It’s why Costco came about in the first place as a business supply house. What does this do for an already lagging US economy to have that many businesses suffer a break down in supply chain?

The other concern I have, although I don’t think we’ll see it much here, is the associated public health implications that come from food shortages and people either attempting to push food through the system (over useage of chemicals and poor sanitation practices). It’s just a thought, and not related to price, but it’s there in the back of my mind so I thought I would throw that out there.

What to do about rice rationing? For general consumers, a quick way to gauge your need until the market corrects itself is look at your consumption level of rice over the last month, either home cooked or restaurant variety. Do some quick math to determine…

If I eat rice 6 times a month and I use 2 cups per meal = 12 cups per month x 12 months = 144 cups = 72 pounds of rice (with 2 cups or rice equaling a pound). While I think it’s rational to have a supply on hand as part of your meal planning process and for food security reasons, the average consumer shouldn’t race out and try to hoard dozens of bags that you wouldn’t normally consume in a year’s period. The same holds true on flour, oil, sugar and any other commoditized staple. It’s only disruptive to the system to do so until long term strategies can be employed to solve food problems.

I do think now is the time to buy if you’re going todo the math and stock up. If Thailand shuts down exports, we’ll see another price doubling (at a minimum) and scarcity will be a factor.

If you’ve done any reading in the past few weeks, you’d have noticed that the conversation around food and food democracy has escalated. How can it not? The World Food Program, while having a commitment from the US, is still short the funds it needs to infuse some temporary relief into the regions that need the most help.

And we’re learning too that while people have wanted to blame rising fuel costs, there’s more to it than that. Things like drought in Australia and agriculture economy are thrown in the mix.

And then of course there’s the whole global….fill in the blank? Is it warming, cooling, shifting? Is it wind patterns changing? Whatever belief you hold is happening to the planet with regard to climate change (definitely not global warming in Oregon as it SNOWED this past weekend!!!), there’s something to be said for the changes in the weather having an affect on food production. Cherry growers in Oregon spent the weekend being worried about how snow, hail, and other unseasonably cold weather traffic was going to affect the crops for this year. Seen the price of cherries? They aren’t cheap as it is. $3.99 a pound last year for fresh, and $9.99 for 20z of dried at Costco yesterday. So big hiccups like pebble-sized hail and 31 degree weather when the trees are bloomed out….not good.

What about the midwest farmers? Very late getting crops in the ground. That means a shorter season for production, and less production means higher prices. Factor in another issue that I read about in the last issue of Progressive Farmer….fertilizer shortages!!! One wouldn’t think that we’d run short on fertilizer, but factor in fuel costs, and higher demand for more production, plus farmers who haven’t committed to orders because they are changing their production mix and we wind up with one more layer in the problem with food prices.

So where’s the democracy in the impending food crisis? There are some that believe we’re not going to pull out of high prices and shortages for several years to come. And is the US government’s agenda of more biofuels going to worsen the situation? Look at how the market treats food. An acre of wine-producing grapes net more for the farmer than an acre of rice, yet an acre of rice is much more productive in keeping food on people’s tables.

It’s time for farmers and their supply chain, governments, and hunger agencies to come together and work on some type of solution. While wars have always been fought over resources, civil unrest over food, a basic human need and right, isn’t something we can afford.

I woke up this morning, and did what I normally do - flip through all the ads in the Sunday paper. The Fred Meyer ad (a Kroger company) caught my eye. Wild Alaska Salmon….$11.99 per pound!!! So in a matter of little more than a week, we’re already seeing this climb. It was 7.99 in the last Fred Meyer ad, so a 33% increase.

Remembering that there was a 3-day sale at Thriftway, I hopped in the car and went down for their wild Alaskan salmon, which had been advertised as being $5.99 a pound in an ad nearly a week old. Their ad had likely been already in the works before the salmon announcement and their buy already secured. I picked up 8# of it and used a $5 off $50 coupon to sweeten the deal and put my little find in the freezer for later use.

But next to that display was the fresh Chinook salmon from this year’s short run before the expected ban on the season. The price??? $29.99 per pound!!!! I am tempted to go back and make one more buy of the $5.99 sockeye (regularly $9.99) while I can still get it done today.

All I can say is it’s going to be a long summer!

It was announced today that the Oregon and California commercial and recreational salmon fishing would be closed this season. Oregon and California are looking at about $30 million in anticipated losses this season, which normally runs from May to October.

In the meantime, Washington and Alaska will be fishing their runs. What does that mean for wild salmon pricing this year? Try about a 150-200% price increase. We could see wild salmon prices as high as $25-$30 a pound. What isn’t clear yet is what that’s going to do to fish prices in general. I don’t eat farmed salmon, but I am willing to bet that we will see an increase in the price of farm-raised salmon as well as people who are uneducated about the health and environmental issues around farm raised salmon are willing to buy any salmon (come on, can injecting it with something to make it pink really be all that good???).

But more than the effect on salmon prices, other species will likely have price increases as well as a result of the ban. Many people who aren’t able to afford $25 a pound for salmon will look to things like Tilapia (about $7.99 a pound), snappers, rockfish, tuna and cod ($5.99 to $7.99 per pound on average). My best guess is that well see about a 20% price increase on those varieties to cover the demand for fish, which by all accounts, is a healthy protein choice.

What to do? Well, if you have some cash on hand, I would suggest buying wild salmon right now for the summer. It can be had this week for between $7.99 and $9.99 per pound. (If you live in an area with stores that put out $10 off $50 type coupons, even better). Figure out how much you might need and buy accordingly.

The National Marine Fisheries service still needs to approve the recommendation of the Pacific Fisheries Management Council, which is expected to happen on May 1st. And the council as I understand it, is hopeful that the salmon runs will be fishable again next year. But of course, if problems in the habitat aren’t resolved by then, this could be a long term price problem for those of us who enjoy fish.