Up, Up, and Away: Food Prices Soaring Worldwide

Image from al-Arab Online.

A few years ago, when I started eating a strict gluten-free diet, my grocery bill tripled. I was shocked at having to pay $6 for a loaf of bread, and began using a bread maker to try to cut costs. Gluten-eating friends and family were invariably horrified when I told them how much gluten-free bread cost.

Today, a $6 loaf of bread isn’t uncommon. The price of flour has risen 40.6% this quarter, according to Forbes Magazine. Friend of the blog KeenEye, who owns a gourmet pizzeria in Oregon, reports:

Our flour?

Now at $37.52 a bag.

Yep. From $9 bucks a bag 142 days ago.

I’m pretty much freaking out.

She’s not alone. Wheat and rice prices are spiraling, causing a rising sense of panic. Business magazines have begun throwing around words like “famine” and “peak wheat.” Rice has hit a 20-year high, and many rice-exporting countries are instituting bans or caps on exports in the hopes of meeting domestic demand:

Vietnam’s government announced here on Friday that it would cut rice exports by nearly a quarter this year. The government hoped that keeping more rice inside the country would hold down prices.

The same day, India effectively banned the export of all but the most expensive grades of rice. Egypt announced on Thursday that it would impose a six-month ban on rice exports, starting April 1, and on Wednesday, Cambodia banned all rice exports except by government agencies. (New York Times)

Food prices are spiking everywhere: while US consumers are feeling the squeeze with an overall 8.9% increase, in Egypt, prices are up by 50%. Food riots have broken out in Guinea, Mauritania, Mexico, Morocco, Senegal, Uzbekistan and Yemen, according to the Times; the Globe and Mail adds Egypt and Cameroon to the list.

There are a number of reasons for the spike in prices. Much of the farmland once devoted to wheat is now dedicate to corn for ethanol production. Ethanol production is also cutting into the production of corn for food, leading to an increase in prices for corn-based ingredients– and as fans of Michael Pollan already know, corn is in just about every processed food produced in the US, in one form or another. Last year 24% of the US corn crop went to ethanol production, and that number is expected to increase this year, thanks to heavy subsidies in the US and European Union.

Droughts in Australia, bad harvests in South America, urbanization of farmland across Asia, and rice-destroying plant viruses in Vietnam (where rice prices have risen 60%), in addition to export caps, are also driving increases. Increased demand for meat in India and China means that a greater amount of grain goes to livestock, since it takes about eight pounds of grain to produce one pound of beef. And since the global food industry relies on oil for processing, transportation and packaging, among other things, the soaring cost of petroleum (thanks, George!) keeps pushing food prices into the stratosphere.

Dwindling grain reserves are adding to the global sense of unease. MSN Money reports that

wheat inventories, called “carry-overs” in the trade, are at 30-year lows even though world wheat production was actually up 1% last year. In the past year, reports show, wheat inventories in the European Union have plunged to 1 million tons from 14 million tons.

A leading Canadian fertilizer executive told analysts recently that according to his company’s calculations, global grain reserves are “precarious,” at just 1.7 months of consumption, down from 3.5 months of reserves as recently as 2000.

In Asia as well, rice inventories have fallen, as the cost of maintaining them increases. Indian economist D.H. Pai Panindiker told VOA News: “At one time, we used to have very large buffer stocks, and those stocks have come down drastically. Now the possibility of expanding that scheme to reach more people is almost out of question, because there are just no stocks available.”

In a crisis that is squeezing even the middle classes, the consequences for the poor will be drastic. In the US, demand is up at food banks, and shoppers are finding new ways to cut down on food expenditures. An MSN message board that asked readers how they were keeping their food bills down garnered 37 pages of responses, most of them along the lines of this one:

We have gone from having 3 regular meals to breakfast, really small lunch (fruit or a yogurt) and an early dinner. We have been going to bed a bit earlier also to avoid being hungry after an early dinner. Seems to be working . The only thing I “splurge” on is hormone free milk. also stopped buying canned goods except for generic cream of chicken/mush. I have noticed that the junk food (which we dont buy) has stayed the same price or is always on some ultra-low sale… go figure…

But the squeeze will be even more drastic in countries already suffering from high rates of hunger. China has begun cracking down on angry citizens, whose demands for food threaten China’s already tarnished Olympic image. Half of Indian children under five already suffer from malnutrition. What will happen to them? How will Somalians, whose government is on the verge of collapse as the threat of famine looms, survive?

Joe and I are feeling the squeeze between food prices, rising prescription copays and student loans. We’ve started writing weekly menus and buying only what we need for the meals we outline. We’re designing them to utilize leftovers as much as possible, and to rely on local ingredients when we can– they’re starting to look like a bargain these days. No more buying lunch out, and I’m afraid we won’t be reviewing too many high-end restaurants. Tell me, readers, what are you doing to survive the crunch? Do you think this is the end of cheap food for good, as some economists are predicting?  Also, if any of you readers are more conversant than I am with the ins and outs of the commodities market, I’d love your input.


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8 Responses to “Up, Up, and Away: Food Prices Soaring Worldwide”

  1. KeenEye Says:

    I keep trying to remind myself of a time (not that) long ago when I had an allowance of $1.00 a week.

    Candy bars were 25 cents.
    Slurpees were 49 cents.
    Video games were a quarter.

    My parents would remind me when I would bemoan these prices that when they were young…

    Candy bars were 10 cents.
    Slurpees were 15 cents.
    Video games weren’t invented.

    So. Does this mean that when we’re grandparents that…

    Candy bars will be $1.
    Slurpees will be $1.50.
    Video games will be life-sized, in 3-D form played out in the living room.

    What I’m getting at is that flour, oil, pork, sugar — all of these things (and much, much more) are only going to go up in price. Forever and ever and ever; we’re going to watch prices go up.

    The small hikes are a hiccup. It’s the large hills that cause us all to struggle, regardless of the “shape” that we’re in when we face them.

    Right now, we’re facing not just hills, but mountains. We’re all about to face a terrific climb.

  2. Tisha Says:

    Thanks for this post. I had been wondering why my grocery bills have seemed so steep recently.

    I am relatively lucky as a single person with a good job, but like you, my student loan payments are just starting and I don’t have much spare cash right now.

    It’s much harder to keep my commitment to ethical eating: to buy the $8/lb butter from grass fed cows rather than the $4 Land of Lakes butter, to choose fair trade sugar over regular. I try to remind myself that the real cost of these items is reflected in the higher price, and that part of the responsibility of having a salary is making ethical choices regarding food.

    Like you, I’ve been examining how much food I end up buying “just because”. Those cacao nibs I bought before Christmas, but then didn’t have time to turn into Xmas cookies? What about that lovely French cheese I bought right before going on vacation and never finished? I cringe when I think about how much food I waste. I’m now shopping off a list. I’ll bake for a birthday, or if I have friends coming for dinner, but I don’t bake anymore “just because.” I don’t really need those sweets and can’t afford them if I bake with grass-fed cow butter.

    My body needs meat (if I don’t have it, I spend all my time in bed, shivering), but I grew up eating meat and fish as side dishes rather than the main meal. I’m making more Asian/Latin American/Meditteraen food and way less European food.

    And I rarely eat out anywhere that costs more than $15. drinks included.

  3. Joe Cleffie Says:

    According to US Gov. statistics, the price of a loaf of bread has risen 32% since January 2005.

    While people are living through history it is hard to get a grasp on the scope of a crisis or event. But a stat like this reminds me of reading about the history of great crises and revolts. This type of inflation on staple goods is what often leads to revolts and civil strife. This can take good a form as in popular revolt to the left, unorganized forms like riots or right wing forms such as violence against immigrants and other acts of racism. Of course, nothing is strictly predictable but it is clear that we are on the cusp of a very volatile period in US history.

    The hegemony of free market ideology is crumbling, with even the Bush Administration putting out a system of government regulation that would’ve been unheard of a few years ago. But what is coming to replace this ideology remains to be seen. Will we see some form of more benevolent Keynesianism al la the New Deal? Some have called for it but in near term what we should expect is that ordinary folks will bear the brunt of this crisis. Most of the proposals coming from the two major parties are some regulation, a little relief and a lot of socialization of the costs of the crisis.

    This period cries out for resistance but sadly the organized left is weak. We can only hope that out of the people coming around the Obama campaign in search of change and others the seeds of a new left reside. Like in the 30’s ordinary people must make it hard for the politicians and their handlers not to give us reform. Until then, we have some rough waters to ride out.

  4. Ed Harris Says:

    Good informative writing! While we hear a lot about hunger worldwide, it’s easy to forget about the hungry here in the ‘developed world’. You might be interested to see the cover of today’s Independent (UK newspaper) – reporting on the deepening economic crisis in the US economy and the number of Americans reliant on food stamps – 28 million apparently! That number seems incredibly high? Is this receiving media attention in the states too?
    More here.

  5. therealpotato Says:

    Hi Ed,

    Thanks for the article– it’s excellent. The food crisis is starting to receive some attention here, but not enough– the US media is concentrating more on Wall Street. (This Onion article sums it up pretty well.)

    The scary thing is that the 28 million number is probably low. A lot of people don’t sign up for food stamps because (a) they don’t realize they’re qualified or that the program is available; (b) they’re embarrassed, since ‘welfare’ is heavily stigmatized; or (c) they are undocumented and afraid to enter the ‘grid’ for fear of deportation.

  6. Jonathan Says:

    really thought-provoking post. we’ve been eating leftovers for lunch since I moved to new york city, but that’s been out of necessity b/c of the prices of buying lunch out. I’m glad I never got used to eating out like that. regardless, this crisis is scary… I’ve just seen so many crazy, scary thing happening lately. the cost of gas, food, rent going through the roof. salaries are not competitive enough to stay afloat. We are in such a worse financial position than our parents were at our age. i’m seriously afraid to bring a child into this world, not only b/c who the hell knows what this place is goign to be like in 20 years, but also b/c i can barely afford it with 2 working people with MASTERS FRIGGIN DEGREES.

    rice used to be the staple food of the poor. i’m going to start figuring out what to do with weeds growing in a small brooklyn backyard!!

    great post.

    amy @ http://www.weareneverfull.com

  7. Hendersonville Epicurean Says:

    I’m hearing the same story about food prices from restaurant owners in my area, Hendersonville, NC.

    Just noticed this morning that scones at one of the coffee houses I haunt have gone up .25 cents since my last visit!

  8. Zat Says:

    I don’t eat bread. Wheat gives me migraines so that shelters me somewhat from the price nuttiness somewhat.

    Dairy is too expensive, but I do eat lots of spuds as my basic foodstuff. They went up a buck for 10 lbs to $4 so I planted two in soil bags with holes for drainage plus a pan to catch water in my apartment as a hedge against inflation. That’s hoarding 😉 of a root sort.

    I also grow herbs.

    I eat a lot of beans and lentils. That has kept the food bill down to $100 per month unless I toss in a turkey for protein for the month.

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