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Food Prices Rising
“It is increasing the price of food for people in the US, it is costing an enormous sum of money for everyone” (Sauser). Food prices are on the rise and there are many factors causing prices to increase, food prices can be expected to rise next year and for years to come. Also local restaurants and community members will be feeling the effects of prices rising. In February 2011, the cost of wholesale food increased by 3.9%, the biggest jump in 36 years (Crowe). These higher prices are affecting the already struggling restaurant industry. Several situations are increasing the cost of food such as climate changes, loss of cropland to nonagricultural use and overpopulation (Brown). According to the USDA, some of the major food commodity categories will rise in price this year. Beef will increase 7-8% this year. Dairy prices are up 6.3% from last year, and are expected to raise 5-6% more. Also higher wheat commodity prices this year will increase Wheat prices by 3.5-4.5%. All these price increases will definitely affect how restaurants in Whatcom County will purchase items, increase menu prices, and keep customers coming in.
Food costs are rising at an incredible rate which will have a great impact on how local restaurants and food service establishments will stay busy in the coming year. Since February 2010, the cost of food worldwide has risen 37 % (Severson). Food-at-home (grocery store) prices are forecast to rise 3.5 to 4.5 percent, while food-away-from-home (restaurant) prices are forecast to increase 3 to 4 percent (Leibtag). Food prices are rising, population growth, the use of grain to fuel cars, loss of cropland to nonfarm uses, climate changes, and corn ethanol are making the prices rise and it will affect local restaurants and communities.
There are many factors that are driving up these costs. Major reasons include population growth, the use of grain to fuel cars, loss of cropland to nonfarm uses, climate changes, and corn ethanol production. The worst drought in Russia in the last half century has wiped out so much of the country’s wheat crop that Russia has banned any exports of grain. Massive floods in Australia’s fertile Queensland area have damaged the country’s crops of wheat, corn, sorghum and vegetables and fruit. And freezing weather in the U.S. and Mexico has damaged produce production (Parker).
Some of the main affected food items are fruits, vegetables, meats and flours which are all main ingredients in restaurants and there isn’t much people can substitute for those items. Here are a few good examples of how food prices are rising: Romaine lettuce has increased 22.9 percent year over year and ground beef has increased 21.2 percent year over year (Hoang). According to the USDA and Consumer Price Index report, beef prices are expected to increase 7-8% this year, dairy prices are up 6.3% from last year, and are expected to increase 5-6% more and higher wheat commodity prices this year will increase Wheat prices by 3.5-4.5% (Leibtag). All of these products are majorly used in the food service industry. This means menu prices will definitely increase in local restaurants.
One of the big factors causing the food prices to rise significantly is corn ethanol and bio-fuel. Corn ethanol is an alternative fuel and its production is hiking up food costs. Twenty-four percent of the US corn crop is now mandated to go to ethanol and the demand for corn ethanol is now at 4.9 billion bushels of corn per year (Weise). As Elizabeth Weise said in her article from USAtoday.com, corn prices have nearly doubled, from three dollars and forty nine cents per bushel in July to six dollars and ten cents per bushel in January (Weise). So as corn prices continue to rise, food prices will also rise. Any product with corn in it will rise in price. This year the country is going to use eighteen to twenty percent of its total corn crops for the production of ethanol (Sauser). Twenty-percent is a significant amount of corn that is being used for ethanol that could be used for food production. This is one of the main reasons why food prices are going up, because twenty percent of the US corn crops are being used for ethanol instead of food production, which makes everything with corn in it rise in price. Sauser states in her article that “All things that use corn are going to have higher prices and higher cost, to some extent, that will be passed on to consumers”. Bottom line is, corn production for ethanol is making corn prices rise, which leads to food prices rising continuously.
On the other hand, some people say that you can’t blame corn ethanol for contributing to rising food prices. In an article that John Block wrote for Chicagotribune.com he is saying that ethanol is not causing food prices to rise. “The US ethanol industry produced a record 13 billion gallons of the bio-fuel, replacing some 445 million barrels of imported oil and supporting more than four hundred thousand jobs that can’t be outsourced” (Block). The US ethanol industry is good because it is creating jobs for US citizens. The corn Ethanol industry is also good because a third of the corn used for ethanol becomes livestock feed (Block). US ethanol production also uses only about three percent of the world’s grain supply (Block). In the article Block also states that American farmers know that the demand for corn is rising, so they are increasing their productivity to keep up with the demand. Corn ethanol production can also be a good thing for the US because it creates many jobs for US citizens, some of the corn used for ethanol becomes livestock feed, and farmers are increasing their productivity.
Maria Judy did a very extensive research report and the results were quite interesting. She chose 8 ingredients that people purchase often and that are also in categories to be most affected by the rising costs. Using old invoices, she tracked the prices each month from January to May. After compiling the cost data for the items she selected, it’s been concluded that almost all the prices of the items have increased over the last five months. Flour went from $15.75 per 50# sack in January to $17.39 per sack in May. Sugar surprisingly has decreased in cost; it started at $41.07 per 50# sack, decreased consistently in February, March and April, and is now on the rise again in May. Bananas have increased monthly, going from $26.08 to $28.68. Apples increased by $2.68 a carton over five months. Bacon has seen a huge increase over these last five months going from $39.20 in January to $52.29 in May. Cheese increased by $11.64 a case from January to May. Almonds were the only other ingredient to actually decrease in cost, which was surprising because nuts are one of the more expensive ingredients purchased. Lastly, white chocolate chips have slightly increased in cost going from $29.56 in January to $31.25 in May. This proves that food prices are increasing substantially in all areas.
Results said that 78.6% of those who took the survey have heard of the current food crisis and increasing costs of food. Forty-one point seven percent believed that loss of cropland to nonagricultural use was one of the main factors of increasing food costs. While all the answers are correct in playing part of the rising costs, only 8.3% felt that climate changes were a main cause, which currently is one of the biggest causes of food prices going up. Forty-six point two percent chose that vegetables would see the biggest price increase. Zero percent chose Wheat, which is already up 41% from last year. When asked the question “Has the current rising costs of food affected how often you go out to eat?” 50% responded yes and 50% responded no. Sixty-four point three percent said they would no longer go to their favorite restaurant if they increased their prices. However, 64.3% said they would still go to their favorite restaurant if they offered customer perks and rewards, despite increases in menu prices.
The results from her research conclude that food prices are on the rise. It will absolutely affect the local food service establishments as well as the community. Reasons for these increases include inclement weather, loss of cropland to nonagricultural use, using corn to make fuel, and overpopulation. Prices on wholesale food are predicted to rise 3.9% in 2011. According to some of her research, majority of restaurants will be forced to increase menu prices. Raising menu prices will definitely affect profits for these places. The Woods Coffee Bakery is a prime example of food price increases. The research proved that in only five months since being open, the costs of the bakery’s main ingredients have already increased in price. More than likely, in the next few months, prices will have to increase.
Community members will play a big role in how profitable food service establishments will be in this next year. The survey showed that 64.3% of respondents would not go to their favorite restaurant as frequently if they raised their prices. On the other hand, 64.3% said that if restaurants provided customer rewards and perks, they would continue to go there, despite increased menu prices. One thing that was recommended was that local restaurants take advantage of offering some type of rewards program this year to keep customers coming in.
Food costs are rising at an incredible rate which will have a great affect on how local restaurants and food service establishments will stay busy in the coming year. Inclement weather, loss of cropland to nonagricultural use, using corn to make fuel, corn ethanol, and overpopulation are all unavoidable factors in the rising costs. It is assured that menu prices will have to increase, but there are a few things restaurants can do to compete with these increases. They could offer customer rewards and perks to give people incentives to come in. Restaurants could shop around with different food service vendors to find lower prices. They could also create menu items using ingredients that are less expensive. Not all establishments will be able to partake in these suggestions, but if they could at least try and utilize some of them, it could definitely help keep profits up in this difficult year ahead.