Federal Government Forcing Up Price of Food

Big Government subsidies fueling rise in cost of food; food prices rising accordingly

Food prices have been rising in the U.S. Why? Two possible reasons why consumers may soon be reminded of the Bad Old Days of Jimmy Carter’s food inflation if a government policy or two isn’t corrected.

THE RETURN OF JIMMY CARTER FOOD INFLATION

Anecdotal evidence says, “Yes!”

While shopping the last couple of weeks at Wal-Mart for groceries, I noticed that several items took substantial (5-7%) jumps in price. Today, after another shopping session, it’s clear that food prices are not only going up, they’re rising across the board. This made me curious.

Food prices are rising. FromFood Inflation Coming To A Household Near You, As Wal-Mart Hikes Prices At Fastest Pace Since Early January:

To this point, our basket showed a 5.8% increase in average prices at Wal-Mart – which represents the most significant sequential increase since the inception of our study in January 2009. Moreover, we only had one rollback item in our basket vs. four in the June study.

So, it’s just not my imagination or locale.

But why? The financial poobahs and the Wall Street Journal have been warning of deflation, but what about inflation? Forbes even explained a few month ago Why Inflation Worries are Overblown.

Russian grain prices are up 100%, food prices in the UK are up–59% in Wales alone.

In the U.S., Sysco Says Food Prices Rose For First Time In A Year On Higher Meat, Dairy Costs.

Then there’s the Wal-Mart story.

Food prices are going up; some say they may “rise dramatically.”

Why?

Two reasons stand out.

From Record Number of Americans Receiving Food Stamp Benefits:

The number of Americans receiving federal aid through the Supplemental Nutrition Assistance Program, commonly known as food stamps, soared to a record 40.8 million in May, according to government data released shortly before the Senate voted to cut billions from the food stamps budget.

But according to U.S. Department of Agriculture figures, the number of people on the food stamp rolls has been growing to record levels for 18 straight months. Nearly $5.5 billion in aid went out to beneficiaries in May alone. The number of May recipients marked a 19 percent increase from a year ago.

While standing in the checkout line, several people checked out ahead of me. Their carts were stuffed so full, it would have been hard to add anything else without it ending up on the floor. These consumers all paid with food stamps. So, apparently, either shoppers using Food Stamps are buying big one time a month. Or, perhaps what the government is dispensing is more than adequate to meet a family’s food needs.

While that’s a good thing, more than a billion dollars more in Food Stamps have entered the marketplace chasing the same amount of food. Might that not lead to some inflation? I realize that part of that extra billion offset previously private spending on food. But, maybe not all of it. I also realize that there will be those who argue that total food purchases might have gone down, not up, because of the increase in food stamps.

Fair enough. But something is driving food prices up. What then?

Just asking. The cure is for the job-killing uncertainty that’s everywhere in the economy to be eliminated. A job is nearly universally preferred to Food Stamps and no money.

But, instead of business-friendly government policies, we get business-bashing. Jobs are scarce and will remain so until adults regain control of the federal government and people who’ve actually run businesses–as opposed to seeing one on TV–can implement more helpful policies.

One other government policy that’s driving up the cost of food–and there have been warnings of this ever since the ethanol boondoggle began–is energy buyers bidding against food buyers for the same product: corn.

From The corn ethanol problem: Food versus energy:

Many Utahns are probably unaware that construction of an ethanol trans-load facility in Ogden could have a harmful impact on the rest of Utah’s food industry. Why? Because the food industry and ethanol producers are all competing for the same commodity: corn.

In a pure free market, this wouldn’t be a problem. We would all compete, and the most efficient producers would be the biggest winners. The problem is that competition for corn does not occur in a pure free market or on a level playing field. The ethanol industry receives federal subsidies and the food industry doesn’t. Government support for ethanol rests on three policies: a tax credit for refiners that blend ethanol into gasoline, an import tariff that makes it too expensive to buy ethanol from foreign suppliers and the Renewable Fuels Standard, which mandates the amount of ethanol that must be blended into gasoline each year.

When the ethanol subsidies began, there was an article in the Wall Street Journal that related the different products that farmers were feeding their hogs, pigs and cattle to substitute for the increased cost of corn.

One pig farmer was feeding stale M&M candies and Reese Cups to his pigs because candy was cheaper than corn. Since corn is a staple to feed livestock, ethanol has contributed to higher food prices by making corn, as well as meat products, more expensive.

Ethanol can’t survive in the free market: it is a gift from government, giving to companies like Archer Daniels Midland and corn growers and taking from everyone who buys food.

During the last couple years of the infamous Carter term (1977-80), inflation was more than a word to food buying families. Prices rose so quickly, that cans of soup would sometimes have five different price tags stamped one on top of the other (in the days before scanners). The can of soup that was placed on the shelf costing 16 cents rose to 17, 19, 20 and 21 cents before the food buyer had a chance to put it in the buggy.

When Ronald Reagan took office, many inflation-slaying policies were put into place and inflation became, after a few years, just a bad memory.

If those days return of the rapidly-rising food prices, look for a lot of politicians in Washington to return home–permanently.

Hopefully, voters will not wait until things get that bad.

Hopefully, it’s not too late now.

by Mondo Frazier
image: mioaklandcounty

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