Hey, Where’s the Cheap Food?   Warren Parker 

Isn’t it interesting that not long ago, when commodity prices, particularly corn, were at high levels, an amazing cry was heard that these prices were the main culprit in higher prices of food on the grocery shelves, and ethanol was the demon of consumers taking away corn from the mouths of babes. 

The Grocery Manufacturers Association spent millions holding news conferences, lobbying Congress, arranging protests, and propagating this belief to as many Americans as possible.  As part of their smear campaign, an immediate halt to the Renewable Fuels Standard was also called for, blaming the RFS for the high prices of grains, therefore the price of food.

Farm Bureau and others in the agriculture industry correctly pointed to several other factors, including the price of fuel, labor, packaging, etc. 

Let’s fast-forward to today.  Corn and other commodities, including oil, are as much as half of what they were.  Where is the average food cost now?  About the same as its highest level when corn was pushing $8 and oil was $140 per barrel?  What gives? 

Some would argue that the prices of products on the store shelves today reflect commodity prices locked in last spring or summer.  If prices are ‘locked in’ that far in advance, then why when oil and grain prices rose earlier this year, did the food companies pass price increases on almost immediately to consumers?

But there’s an overriding fact that surpasses any of the above arguments. 

That fact is that with corn at its highest level, there was still only around four or five cents worth of corn in a box of corn flakes, hardly the huge mover of food prices portrayed by the Grocery Manufacturers Association.  Other parts of their argument are also shown to be false. 

Two studies were released recently showing that ethanol production can increase substantially without affecting food or feed sector supplies. Further, the studies indicate the ‘carbon footprint’ of ethanol is less than gasoline.  The authors of the study were Ross Korves, economic policy analyst at ProExporter Network, and Dr. Steffen Mueller, principal research economist at the University of Illinois at Chicago’s Energy Resources Center.  All this, and commodity prices are down nearly to pre-spike levels.

But maybe the most interesting fact is to look at ’07-’08 profits for companies.  Guess whose profits by percentage matched or exceeded oil companies in recent reports?  If you chose members of the Grocery Manufacturers Association, you’d be right.

Just a couple of examples: Dean Foods, the nation's largest dairy company reported an early quarter net income of $48.9 million compared with $28.4 million a year earlier. Sales rose 9% to $3.1 billion due to higher milk and dairy prices.  That means second quarter profits rose 72%.

Del Monte had it rough though. The company, headquartered in San Francisco CA, earned $50.4 million, or 25 cents per share, on sales of $1.04 billion for a quarter.  Gee, that's only a 37 percent increase in earnings.  The profits of members such as Kraft, Kellogg, General Mills and others show similar, and higher, numbers.

Senator Charles Grassley, R-Iowa, wrote a letter to the GMA this week reminding the group of its smear campaign on ethanol and push last spring to tie high food prices to ethanol production.

"The association systematically tried to blame ethanol for high food prices without any intellectual factual basis," Grassley said. "Now the truth is being proven.  So I hope to hear from the Grocery Manufacturers Association what its members are going to do. Are they going to do the right thing? If not, then it seems the association's credibility is officially shot."

I don’t always agree with Senator Grassley, but this time I’m with him.  Consumers have been subject to a massive and deceptive multi-million dollar campaign by not only the Grocery Manufacturers Association, but others as well.  Much of the public has been duped to contributing to massive corporate profits from their hard-earned income, only to be told it's the farmer's fault.  It’s time the truth is clear, and it’s time grocery prices came down.

Sources: Dean Foods, Del Monte

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