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Steve Chiotakis: Besides oil, the cost of food continues to rise. The price of corn and wheat is up more than 50 percent over last year.
Adriene Hill now — from the Marketplace Sustainability desk — and why we’re not seeing such dramatic spikes at the grocery store.
Adriene Hill: There’s a lot to learn from this unpretentious loaf of supermarket bread. Take it, flip it around, and check out what’s in it. You’ll see a couple ingredients that have been making headlines: wheat, sugar, dairy.
World food prices are up, in part, on increased demand — more people with more money, hungry for more food. But prices for each of the ingredients in our bread are up for other, more specific reasons too. The wheat:
Pat Westhoff: Well the wheat market was probably most severely affected by the very bad crop that occurred in the Russia and Ukraine last year.
Pat Westhoff heads the Food and Agricultural Policy Research Institute at the University of Missouri. The sugar, he says there are two factors at play: Bad weather has cut supplies and Brazil is using sugar for ethanol. And with dairy prices, it’s a combination of rising grain and feed prices and a production cut-back; farmers cut their herds during the recession.
But all these factors driving up global prices remain unlikely to make a huge dent in grocery budgets here in the U.S. That’s partly because of government policies and because:
Westhoff: Only about 20 percent of the value of the food we consume can be attributed to the cost of the food as it leaves the farm.
To be super precise, according to the USDA, for every dollar we spend on food, farmers get about 16 cents from the sales of raw food commodities. A big chunk of the rest goes to people who process the food, the people who prepare the food, and the retailers who sell it. Which explains why when the price of wheat goes up 50 percent, the price of our bread doesn’t spike with it.
The USDA is guessing U.S. food prices will go up about 3 to 4 percent this year. There’s another reason that rising food prices aren’t as problematic in this country as they are in other places.
Rosamond Naylor: You know in the United States, we spend less than 10 percent of our household budget overall on average on food.
Rosamond Naylor heads the Program on Food Security and the Environment at Stanford. She says, compare that to Asia and Africa.
Naylor: Many of those households are spending 60, 70, even 80 percent of their household budgets on food. And so any kind of a price spike really makes a difference to their ability to feed themselves and their households.
So even when the price of my whole wheat bread inches up at the grocery, my morning toast is unlikely to become a luxury item.
I’m Adriene Hill for Marketplace.
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