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Cheap Food May Be a Thing of the Past in U.S. - Latimes

Cheap Food May Be a Thing of the Past in U.S. - Latimes

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Published by: news4you on Mar 28, 2011
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latimes.com/business/la-fi-cheap-food-20110317,0,1746312.story
latimes.com
Cheap food may be a thing of the past in U.S.
Americans spend only about 10% of their annual incomes on food, compared with asmuch as 70% in other countries, but with prices climbing, some economists wonderwhether the nation's abundance of affordable food is history.
By P.J. Huffstutter, Los Angeles Times4:46 PM PDT, March 16, 2011American consumers have long enjoyed a luxury thatfew others could boast: an abundance of affordablefood.But with prices of wheat, corn and other staples soaring,some economists and scientists are wondering how longthat can last.On Wednesday, the U.S. Labor Department reportedthat wholesale food prices jumped 3.9% in Februaryover January, the highest monthly increase in 37 years.Economists expect to see a similar uptick in whatconsumers are paying for food at retail when the Labor Department releases its consumer price index Thursday."Food prices have
 
been rising a lot faster, becauseunderlying costs have really shot up. You're seeing someingredients up 40%, 50%, 60% over last year," said Ephraim Leibtag, a U.S. Department of Agricultureeconomist. "When you see wheat prices close to 80% up, that's going to ripple out to the public."Economists warn that such prices will probably remain high this year and possibly much longer, driven by aconfluence of factors: the fall of the U.S. dollar, slowing growth in crop yields, political unrest in the MiddleEast, high crude oil prices and a revived interest in crop-based biofuels.Violent weather patterns, which some scientists blame on climate change, are compounding the problem.Recent floods in Australia devastated much of the wheat crop, while a drought threatened China's."We're not sure if these extremes in weather are the new normal," said Clive James, founder of the not-for-profit International Service for the Acquisition of Agri-Biotech Applications. "But the patterns we've seen inthe past few years show that this may become more the rule than the exception."Some commodity analysts said it was still too early to tell what the broader economic effect would be fromthe March 11 earthquake, tsunami and growing nuclear crisis in Japan. But they warn that the catastrophes,added to the turmoil in the Middle East and North Africa, could slow the economic recovery in the U.S.
Cheap food may be a thing of the past in U.S. - latimes.com http://www.latimes.com/business/la-fi-cheap-food-20110317,0,2260494,...1 of 3 3/17/2011 9:38 PM
 
They worry that even a temporary boost in grocery bills could have shoppers once again slamming their pocketbooks shut.U.S. consumers spend only about 10% of their annual income on food, yet Americans are already flinching atthe gas pumps and at the market checkout stand. The USDA has projected that food prices will rise 3% to 4%this year.Produce prices are rising sharply. So is the price of orange juice. This month, PepsiCo said it was raisingprices for its Tropicana juices by as much as 8%, after record cold temperatures chilled this season's citruscrop in Florida. Rival Coca-Cola Co. had already raised prices on its Minute Maid line.Some of the biggest increases are expected in the meat section, as livestock feed prices have doubled in thelast year, Leibtag said. McDonald's Corp. has warned that it might charge more for Big Macs and other items.Meat producer Smithfield Foods Inc. recently cautioned that consumers will be paying more for bacon, chopsand ribs during this summer's barbecue season."Retailers understand there will be more price pressure," Smithfield Foods Chief Executive C. Larry Popesaid during the company's recent earnings call with analysts.Before the tragedy in Japan, world food prices had reached a record high this year as stockpiles of keycommodities dwindled, according to a price index of 55 food export commodities compiled by the UnitedNations' Food and Agriculture Organization.Increased demand from China, India and other developing nations is also driving up prices, as a growingmiddle class is consuming more protein. According to China's Ministry of Agriculture, urban Chineseincreased their consumption of chicken 219% per capital from 1983 to 2006.Elsewhere in the world, where people spend 30% to 70% or more of their annual income on food, starvationis growing. The World Bank has reported that as many as 44 million more people had been forced into hunger because of the rising costs of food. That, in turn, has helped fuel the conflict in Libya and helped oust leadersin Tunisia and Egypt in recent months."The situation is volatile and we're at a point of transition," said Abdolreza Abbassian, a grain economist withthe United Nations' Food and Agriculture Organization.Now, as fears mount of a repeat of the food riots around the world in 2007 and 2008, developing new ways tofeed the world has become more pressing.For some, the solution is rooted in promoting natural farming techniques and weaning farmers off growingcrops for biofuels. A recent U.N. report cited evidence of so-called "agro-ecology" techniques boosting cropyields by 80% in 57 developing countries.Others argue that a broad structural change is needed in agriculture, led by more powerful technology.Amid the debate, the use of genetically engineered seeds is steadily growing. Biotech crops now are used on10% of the world's farmland, up from nearly nothing 15 years ago, according to a recent survey by theInternational Service for the Acquisition of Agri-Biotech Applications. Last year, 81% of all soybeans, 64%of cotton, 29% of corn and 23% of canola grown worldwide came from biotech seeds, the organization said.Historically, many biotech crops are grown to feed livestock or as ingredients for biofuels, rather than for 
Cheap food may be a thing of the past in U.S. - latimes.com http://www.latimes.com/business/la-fi-cheap-food-20110317,0,2260494,...2 of 3 3/17/2011 9:38 PM

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