Healthy soil and sustainable growing

["Tradingpost" <tradingpost@lobo.net>]

For what it's worth, I think they're wrong on several counts. I mean, they 
can't afford to set off a nationwide panic. Their advertisers wouldn't like 
it.

paul tradingpost@lobo.net
-----------------------------------------

Food price rise could last another two years
Experts say there won't be a food shortage in the U.S., but more consumers 
will trade down in their grocery shopping.
Last Updated: April 30, 2008: 4:05 PM EDT
http://money.cnn.com/2008/04/30/news/economy/food_prices/index.htm?postversion=2008043016

NEW YORK (CNNMoney.com) -- You may have to get used to paying more for your 
groceries for another two years or more.

Experts say an increase in global food consumption combined with increasing 
use of crops such as corn and soybeans for alternative fuel production are 
partly to blame.

Agricultural economists who've studied food price fluctuations cite 
historical trends that show run-ups in farm commodity prices typically happen 
in five-year cycles.

Prices flare up in the first two to three years of the cycle and then start 
to moderate by the fourth or fifth year, said Chris Hurt, agricultural 
economist at Purdue University .

If 2007 was the first year of this latest cycle, Hurt said farm supply could 
start catching up to demand by 2010, helping to push down milk, bread, cereal 
and other grocery prices.

Until then, "Americans will be moving backward in their [food] lifestyle." By 
that he means that more families will trade down to cheaper food 
alternatives, or eat out less often, in order to adjust their budgets to both 
higher food and fuel costs.

Wal-Mart (WMT, Fortune 500), the No. 1 discounter and supermarket chain, said 
Tuesday that spending patterns in its stores already support the trend. The 
retailer said shoppers are buying more white meat and less red meat, stocking 
up on larger package sizes and buying more boxed frozen meals as eating at 
home replaces going out.

"This is the first price boom we've seen since the 1970s," said Bill Knudson, 
professor of agricultural economics at Michigan State University, agreed. 
"There's an old industry saying that high prices cure high prices. My 
personal opinion is that food prices will remain high for another two or 
three more years."

The good news, however, is that "there's no grave concern" of a pending food 
shortage in the United States, Hurt said.

Why is food more expensive now?

Experts point to four main global trends for the rise in food prices.

First, growing incomes in developing countries such as China, India, Malaysia 
mean citizens in these countries are eating better and more frequently, 
thereby putting more demand on the global food supply.

"People are consuming more quantity and higher-quality foods," said Hurt. 
"They are eating more meats, eggs, grains and [drinking] milk."

Second, adverse weather patterns over the past four years have harmed crop 
production in Australia, southern Europe, Ukraine and even parts of the 
United States.

American Farm Bureau Federation (AFBF) economist Jim Sartwelle said a 
prolonged drought in Australia - a major wheat and dairy producer - has led 
to big drops in world exports of wheat and milk.

Third, the United States is normally a big food surplus nation but, "with a 
weak dollar, there's been a run on our pantry of food supplies," Sartwelle 
said. "A lot of our excess production is going overseas and this is pushing 
up domestic prices."

Fourth, burgeoning demand in the European Union and the United States for 
ethanol and other biofuels has sparked a price surge in corn, soybeans, 
sugarcane and other commodities used to produce those alternative fuels.

It's not only consumers feeling the price pain, Sartwelle said.

He said that "even with higher retail prices, farmers and grocers get very 
little increase in their profit margin," because it's being offset by higher 
packaging costs, energy cost to produce and stock food and fuel to transport 
products.

Bill Ferriera, president of the Apricot Producers of California, also sees a 
bump-up in the costs of farming.

"Fertilizer costs have doubled from last year and farm labor availability is 
a big problem," he said. "Many farmers are choosing not to grow produce that 
is labor intensive."

Despite these food price hikes, Americans still spend only about 10% of their 
disposable income on food and beverage purchases per year, according to the 
Department of Agriculture.

That's below the 15% share of disposable income that Europeans spend on food 
and drinks, and the whopping 70% that citizens of Pakistan and Bangladesh 
budget for consumables, said Hurt.

So even with a 4.5% expected rise in overall food prices, Americans, per 
person, will only spend an extra $87 this year on groceries, according to the 
Economic Research Service of the Department of Agriculture.

But that's little consolation for consumers whose budgets are already 
stretched amid the the worst food price inflation in 17 years, according to 
government reports.

The latest nationwide quarterly survey from the AFBF, which tracks 
supermarket prices for 16 basic grocery items, showed the total cost of its 
basket of goods rose to $45.03 in the first quarter of 2008, up 8% from the 
prior quarter.

Products with the steepest retail price jumps were a 5-pound bag of flour, up 
69 cents to $2.39; cheddar cheese, up 61 cents to $4.71 a pound; corn oil, up 
58 cents to $3.01 a 32-ounce bottle; and dozen large eggs, up 55 cents to 
$2.16.

But higher prices aren't here to stay, Hurt said. He's confident that 
producers will allocate more land to production over the next two to three 
years. "I expect greater use of technology to increase crop yields and better 
use of genetics to create drought-tolerant crops," he said.

Knudson said the United States this year is expected to dedicate 2 million 
acres of land from its federal Conservation Reserve Program to farming in 
order to increase production during lean times.

"In Canada more land will also be committed to farming this year," he said. 
"All this should help to eventually increase food supplies through the 
[price] boom cycle." To top of page