The Shopping Cart Economist

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.