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Food for thought

Bruce Krasting's picture




 

The folks at the USDA released their projections for 2011/2012-food price inflation. The bad news is that feeding ourselves will cost ~4% more in 2011. The good news is that USDA thinks prices will rise only ~2.5% next year.

I shop (I hate it). My food inflation is closer to 10%. It depends on what you eat. For example, from the report:

 

Meats, poultry and fish +6%
Seafood +6.5%
Beef +9%
Fresh vegetables +5%
Cooking oils +7.5%

These items are all well above the average set by the USDA. The following kept the index low:

 

Processed vegetables +1.5%
Beverages +2%

After looking at this I loaded up on canned peas and Coke.

 

There’s other information at the site I thought was interesting. For example, what’s your guess on the amount spent for food prepared at home and the amount spent on eating out?

 

Answer: 52% is prepared at home, 48% is purchased and eaten onsite or taken home. Half of what we eat is “out”. I find that to be a surprisingly high number. Behind that 50-50 ratio is, no doubt, the problem with diabetes and obesity.

If you were wondering how the restaurant-bar business did during the depression the USDA has the numbers. My conclusion is that depressions are very bad for eating establishments. It takes a long time for a real recovery in spending habits. It’s also clear that wars are very good for the restaurant biz.

 

 

The “eat out” numbers did fall in 2009. But they recovered in 10’ and are headed higher again in 11’. We had recession. A big one. But consumers barely batted an eye. I’m surprised at this result.

 

 

The At Home and Away total 2010 food bill came to $1.2T. That makes eating the largest industry in America.

In 1930 19% of all food consumed was Produced at Home. By 1960 that percentage had fallen to 6%. In 2010 it was only 1.6%. While this trend is not surprising, the magnitude of the drop is worth noting. At one time we were a nation of gardeners, today we just do ‘drive through’.

The food we eat makes us sick. The 2010 estimate for food related illnesses came in at a lumpy 76,000,000 people (About ¼ of us get sick every year). These illnesses caused 325,000 hospitalizations and 5,000 deaths. The economic costs of these illnesses came to $152 billion. In other words, the bad food we eat cost us significantly more in 2010 than the combined operations in Iraq and Afghanistan.

It’s not surprising that the US pays less for food as a percentage of income than any other country. But the comparisons are still interesting. The US spends 6.5% of disposable income for food. Poorer countries like Nigeria, Kenya and Cameroon are forced to pay ~45% of incomes to put food on the table. The high population countries are as follows:

 

Vietnam = 38%
Indonesia = 32%
India = 28%
China = 22%

I find these numbers troubling. There is only one direction for them to go. The developing countries with big populations will see greater gains in income, with that will lead to increased food consumption. Approximately 30% of income goes to food in these areas.  It’s hard not to see that this is going to push up the prices the globe pays for everything we eat.

For example, the USDA put the per person food cost in China at $129 in 2000. Today that number is $360 (280% increase). Over the same period the USA consumption increased only 42%.

It’s old news that China and the other big/fast growing populations are consuming an ever-increasing amount of the world's supply. But these numbers are scary big. If the underlying trends continue (why would they not?) then we are headed into supply problems that can only mean rapidly rising prices.

This conclusion gets back to the beginning. Food inflation in America is running today at 5+%. The USDA says the inflation will moderate next year. This is more government hopium. I’ll take the “over” on their numbers. In my view rapid increases over the next decade are baked in the cake.

The most regressive economic consequence is for food inflation to take place. We have 45mm Americans on food stamps and tens of millions of others on the edge. I find it ironic that the Federal Reserve excludes food inflation when setting monetary policy. While the Fed can’t be blamed for rising food costs, they are most certainly stoking the fires.

Bernanke has said he wants to contain inflation (excluding food and energy) at less than 2%. Food inflation is running at double his target. Possibly Ben needs a new Mandate.

.

 

 

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Sun, 10/30/2011 - 23:12 | 1827416 Biff Malibu
Biff Malibu's picture

Hi dolly
You are very intelligent and definitely welcome at our house any day. From day 1 I told my wife that I couldn't marry her until I could support her. We have 4 kids that she teaches every day. We live cheap. We homeschool as well. Believe it or not she gets the most "hating" from other women that she stays home.
It's nice for me too. My blood pressure is lower knowing my kids are well cared for while I'm at work.
Biff

Sun, 10/30/2011 - 14:58 | 1826538 falga
falga's picture

40% of corn is going for fuel and 10% of worldwide veg oil is being used for biodiesel! This impact is being felt but it is unavoidable as mineral oil remains the dominant energy policy in US despite very clear signals that a dramatic switch in consumption behavior is necessary.... Coal is being burned at alarming rates yet prices keep going higher. Same for mineral oil. If the US ordered that all private cars switch to diesel, then we would economize 35% of imported crude. This all requires revolutionary energy policies that are far from being implemented!

Sun, 10/30/2011 - 09:45 | 1826077 moneymutt
moneymutt's picture

The biggest contributer to the rise in US meat and dairy and processed food prices is ethanol. Forget about foreign demand, look at the extrordinary demand for corn from ethanol "business" put ethanol into free market and price of food and AG land will drop and taxpayers will be subsidizing big corps like Cargill and ADM that much less. But unfortunately we have two senators per state and IA is start of presidential primaries...

Sun, 10/30/2011 - 18:48 | 1826888 blunderdog
blunderdog's picture

Decent point there, but why the fuck are we feeding corn and meat byproducts to our cows in the first place, you know?

Oh...nevermind, I know.  It's more profitable. 

It produces shitty food, but the point of agribusiness never was to produce food in the first place.

Sun, 10/30/2011 - 23:08 | 1827411 Cathartes Aura
Cathartes Aura's picture

It produces shitty food, but the point of agribusiness never was to produce food in the first place.

the truth!

and the GMO corn is only fed to cows in their last days, to quickly fatten them up prior to weighing, selling & slaughter.

High Fructose Corn Syrup, same deal for humans. . .

Sun, 10/30/2011 - 09:48 | 1826071 moneymutt
moneymutt's picture

US consumers eating habits respond to market signals. We eat out now a lot because it makes sense economically. It's cheaper than hiring servants (that used to be economically viable in many countries) and food costs, even including the eating out all the time, are a smaller part of our budget than in the 70s. Since families often need two parents working to pay house price/rent , education costs and health care costs, all of which inflated greatly compared to price of food, then two working parents, or increasing number of single parent homes, get food out as a time saving convenience.

In Norway, food is very expensive and people rarely eat out, even tho their middle class is doing ,much better than ours. In US, food in the 60s and 70s was bigger part of family budget but middle class did very very well, because housing etc...was much cheaper. So in a time that food and restaurant food got cheaper and parents had less time in home, guess what, Americans began eating out more.

Sun, 10/30/2011 - 14:29 | 1826476 General Debility
General Debility's picture

I grow my own (yup in the city) in tyres and freeze it. Not with monsanto seeds either.

I love that rat picture. i nearly fell off my chair laughing.

Sun, 10/30/2011 - 09:20 | 1826046 minosgal
minosgal's picture

Since '96 there's been an expansion in the restaurant meals allowance for food benefit programs. [MPP §63-102(e)(2)(H); ACIN I-31-04]

Makes me wonder how 'Restaurants' are defined in the recession recovery chart.

In Fla, for example, Church's Fried Chicken is authorized to accept EBT cards. Are benefit card purchases counted by the USDA same as cash? Does USDA count 'sales' volume or income in their analysis of restaurant recovery?

Alas, looks like there will be even more recession recovery for restaurants. From a USA Today article:

'The number of businesses approved to accept food stamps grew by a third from 2005 to 2010, U.S. Department of Agriculture records show, as vendors from convenience and dollar discount stores to gas stations and pharmacies increasingly joined the growing entitlement program.'

http://www.usatoday.com/money/industries/food/story/2011-09-05/More-rest...

 

Sun, 10/30/2011 - 07:32 | 1825970 swamp
swamp's picture

I eat organic and VEGAN, and mostly at home. Can't stand most food stores, or restaurants. I don't buy any packaged food and don't buy any sauces. I make everything from scratch and avoid Canola Oil and other toxic foods. I do my own sprouting and evvery few days have fresh sprouts. I soak my legumes and rice, only thing I buy premade is organic bread made with organic wheat, sea salt and filtered water. Pure food is easy to find. I'm looking into growing a small garden, besides the sprouting I do. Another thing about buying groceries and not eating out is that groceries do not have sales tax in CA, so no money goes to the sink hole in Sacramento the state capitol.

Sun, 10/30/2011 - 23:01 | 1827399 ForTheWorld
ForTheWorld's picture

Growing your own vegetables is the best. Even though I live in an apartment, I've got a small balcony that gets a lot of sunlight, and as such I grow baby spinach, green and red oak lettuce, garlic (at least in winter), cilantro, parsley and tomatoes. If I decided to grow peppers, I'd be able to have enough for burritos each night (my wife makes fantastic tortillas from scratch).

The plan is to throw all the vegetable scraps into a worm farm and use the compost to replenish the soil at the end of the season, and then be able to grow decent, clean food through winter.

Sun, 10/30/2011 - 02:42 | 1825858 Milton Waddams
Milton Waddams's picture

This 'food inflation' scam is perpetuated mostly upon the most undiscerning consumers.  Finding incredibly affordable deals is trivial.  Yes, even in these post-modern times ya got to 'hunt' a bit.

Sun, 10/30/2011 - 00:19 | 1825691 bill1102inf
bill1102inf's picture

WE are a bunch of MORONS,  cut the food stamp amounts in HALF and WATCH the food prices fall so that the 45million can afford to eat.  We have a fucking FOOD STAMP BUBBLE here folks, like everything else.  Lets RESET ALREADY!!!

 

Who gives a shit if it costs 45% of income in NIGERIA to put food on the table??? What Fing table???? They dont have a table, maybe a rock.  ALL those people do is eat, and fuck.  THATS IT!!!! Income??? What income??? Most of the world has almost NO INCOME, and the rest of us use fake fiat debt dollars. Even the damn Arabs that have no debt and are up to their eyeballs in fucking oil.  Those rat bastards are lucky to have been born atop the stuff because if they were not, there would be nothing but sheep fucking goat herders in the entire Middle East.  Africa makes NOTHING, the Middle East makes NOTHING.  There are very few countries that make shit on this planet. The US is one of them, that and we grow all of our own food.  Thats the reason why the salary of one guy on the Honda assembly line COULD pay for an entire city in NIGERIA to eat for a freaking year.  

 

If the US would pull its head out of its ass, we would take our place at the #1 SPOT in everything in this fucked up world.

Sat, 10/29/2011 - 23:58 | 1825666 TheMerryPrankster
TheMerryPrankster's picture

The Botany of desire:

http://video.pbs.org/video/1283872815/

 

Sat, 10/29/2011 - 23:03 | 1825596 digalert
digalert's picture

In the eighties I remember getting five or six bags, the big paper ones, of groceries for way under $100. Now it's easy to push a hundred bucks in the 20-items-or-less-line.

Sun, 10/30/2011 - 07:27 | 1825974 ForTheWorld
ForTheWorld's picture

I'm curious as to what you're buying. My wife and I can purchase $50 of groceries for the two o fus and it will last us a week, so spending $100 on 20 items is slightly concerning. I'm in Australia, where prices are higher (both in absolute numbers and percentage of income) than the US or Canada (I've lived in both as well).

Sat, 10/29/2011 - 22:47 | 1825582 jomama
jomama's picture

er, you hate shopping...?

Sat, 10/29/2011 - 22:06 | 1825449 ricocyb13
ricocyb13's picture

Two excellent movies about food everyone should watch:

 

1)

We feed the world

2)

Monsanto

 

Enjoy your meal!

Sat, 10/29/2011 - 22:23 | 1825547 Arkadaba
Sat, 10/29/2011 - 20:16 | 1825350 bigdawg
bigdawg's picture

"While the Fed can’t be blamed for rising food costs, they are most certainly stoking the fires."

Yeah, we all know that printing money doesn't cause inflation...really, Bruce?

Sat, 10/29/2011 - 18:20 | 1825114 Rastamann
Rastamann's picture

Surely zero hedge isn't advocating for MORE eeeeeeeevil gov't regulation of food quality? that would be against the Ron Paul-ite nihilist meme that you all are un-educatedly SHOUTING....riiiiiiiiiight?

 

what you SHOULD be doing is rolling the dice when you buy food for your wife and kids and WHEN THEY DIE from some simple easily detectible bacteria.....well don't worry.....the FREE MARKET sorts all that out.

 

 

Sun, 10/30/2011 - 19:55 | 1827025 my puppy for prez
my puppy for prez's picture

Excuse me!!!

It's GOVERNMENT REGULATION that is killing our food!  Banning hemp, raw dairly, swat-teaming llocal food markets, and FDA and USDA tyrrany every single day....

Without this horrid government intervention, people would be able to freely choose what THEY put in their own body!  The local food movement is a good example.  These are people who are very concerned about the quality of food, and go the extra mile to buy local and know from where their food comes.  These people, and the farmers they support, are the BIGGEST targets of our "caring regulators".  Small farms and food freedoms are being threatened every single day by the feds.  I should know...I follow this stuff daily!  They don't want to protect you....they want to enslave and KILL you (slowly, of course)!

Your argument is full of USDA swiss cheese holes!!!

Sun, 10/30/2011 - 15:01 | 1826550 blunderdog
blunderdog's picture

Yeah, right on. 

That's why you hedge against the death of loved ones with insurance.  If you adequately insure your family, you can purchase a suitable replacement from some Third World country when they're killed by corporate malfeasance.

Assuming the insurance pays out.  So I guess you might need to hedge your insurance, too.  But that's what the market's for.

Sun, 10/30/2011 - 02:42 | 1825859 penisouraus erecti
penisouraus erecti's picture

you are a fucking moron. have a nice day.

Sun, 10/30/2011 - 02:02 | 1825830 Cathartes Aura
Cathartes Aura's picture

Some of us have long considered horizontal gene transfer to be the most serious hidden and underestimated hazard of genetic engineering, and have alerted regulators accordingly, time and again, since GMOs were first released (see for example [3, 4] (Gene Technology and Gene Ecology of Infectious Diseases, ISIS scientific publication; Genetic Engineering Dream or Nightmare, ISIS publication). The recent “emergency” warning sent by a senior US Department of Agriculture scientist to US Secretary of Agriculture on a suspected pathogen “new to science” associated with GM crops may prove to be a case in point [5] (Emergency! Pathogen New to Science Found in Roundup Ready GM Crops? SiS 50).

http://farmwars.info/?p=5504

Sun, 10/30/2011 - 09:02 | 1826033 Escapeclaws
Escapeclaws's picture

Thanks for the info and the great website reference. Thanks to Bruce for writing about food--these vital topics generate a lot of replies that introduce new websites with valuable information, such as Farm Wars or earthlink. In this way, due to the intelligence of the posters at ZH, it a win-win for everyone. A valuable side-benefit for a site like this.

Sat, 10/29/2011 - 23:10 | 1825610 sun tzu
sun tzu's picture

Your obamabot government just raided an organic foods store with machine guns in hand and destroyed thousands of gallons of raw milk that people have been drinking for thousands of years because it is "dangerous". You are only allowed to drink FDA approved milk where the cows are pumped full of growth hormones and antibiotics. Does that make you obamabots feel better knowing the bureaucrats are looking out for you? Have a bowl of cereal tomorrow morning with some genetically modified corn flakes and milk packed full of hormones, you fat stupid asshole

Sun, 10/30/2011 - 09:54 | 1826083 moneymutt
moneymutt's picture

Ummm, did you wake up politically yesterday, do you think this is new to Obama admin, how ignorant are you? And most raw milk battles are state govt actions. I don't agree with the laws against raw milk, I think the dangers and their record of issues should be well disclaimed...but to characterize this Obama proble is just ignorant, that would lead to believe that all Repubs innchagre would not do this? Get past your partisan blinders and we might actually get govt to respond to us...bug businesses that buy Repub votes just like they buy Dem votes don't like raw milk producers, so guess what, they get shut down.

Sat, 10/29/2011 - 20:22 | 1825338 Escapeclaws
Escapeclaws's picture

Yes, you have that right about the free market. Milton Friedman was a great proponent of voting with your feet.  If you eat a bad piece of meat from a butcher and you die from it, the idea is that you do not go back to buy meat from that butcher.  If the same thing happens to a lot of people, he will soon be out of business.  This is an example of the magic of the "invisible hand" of Adam Smith at work.

We believe in self-regulation in this country, and in fact most food inspection is done by the producers themselves, and of course we already know that banks and financial markets are self-regulating.

Regarding food, I only buy meat that was organically raised in the local area.  I am so afraid of the American meat supply after having read "Deadly Feasts" by Richard Rhodes.  He provides evidence that mad cow disease is in the meat we eat and claims that much of what is diagnosed as Alzeimer's disease is really from eating bad meat.  He blames the rendering process which is done at too low temperatures to neutralize prions. Meat by-products are rendered and fed back to the cattle.  This is analogous to the spread of kuru disease in New Guinea natives who would eat their own relatives--this type of cannablism is the source of these prions.  In Europe, they regulate this process and require the meat to be rendered at higher temperatures than in the US. Rhodes even speculated that the mysterious cow deaths that some people thought was due to UFO's was actually the Department of Agriculture doing night-time inspections of cows via black helicopters.  They would surgically remove those parts of the cow where mad cow disease would be most likely to concentrate.  It was an interesting book but got very little press and I noticed that the week after I read it, it looked like all the remaining copies had been removed from the bookstore.  You saw what happened to Oprah when she broached this issue. Note too that you can no longer buy bonemeal in health food stores, even to dust tomatoes with.  Even if the meat is not tainted with CJD, I still don't trust it after all the stories you hear about "downer" cows being turned in to hamburger by unscrupulous producers. Then there is always our GM vegetables to worry about. Every time I come back to America and eat the food, I get sick from it.  Best to go completely organic if you can and not buy from the big chain stores except for specific brands that you trust. As for eating in restaurants, I'll never forget the TV undercover video I saw where some pissed off kitchen employee was pissing in the batter.

Sun, 10/30/2011 - 16:25 | 1826708 Joy on Maui
Joy on Maui's picture

Your post makes me feel a little less alone.  I totally resonate with your statement that eating in the US makes you feel sick.  Same here!   I seem to be able to eat just about anything in France, but here, I am down to a very narrow list of foods I can tolerate.  I may well need to emigrate just for food safety reasons.   I may be the only naturalized citizen looking to leave the US again for that reason.  Thank God for grass-fed Maui beef.

Mon, 10/31/2011 - 14:02 | 1829089 Escapeclaws
Escapeclaws's picture

Wow, I hestitated to say exactly the same thing--I was thinking of France also.  Good luck with your plans, I hope it works out for you.

Sun, 10/30/2011 - 15:57 | 1826663 Jena
Jena's picture

The bizarre and horrifying thing about prions is that they cannot be cleaned, removed or sterilized from any surface once they are present on it.  Not with mechanical chemical or heat cleaning, disinfection or sterilization.  Any used surgical instrument must be destroyed.  This is why only disposable instruments are now used for tonsillectomies and appendectomies in Great Britain (and the U.S.), because that lymphatic tissue was found to be an area that had highly concentrated amounts of prions.  As for the blood supply, well... it is just another reason not to need a blood product.

Pro-MED is an interesting digest dedicated to reporting outbreaks of infectious human, animal and plant diseases around the world.  Since the European CJD crisis has diminished, they no longer publish updates but the archives hold lots of articles that follow the investigation and what was learned along the way.  It's easy to subscribe:

http://www.promedmail.org/

Mon, 10/31/2011 - 14:01 | 1829075 Escapeclaws
Escapeclaws's picture

Thanks for the reference.  Actually, I didn't know that about surgical instruments.  Incredible--and inconsistent with the claim that there is no CJD in America, otherwise, why such an extreme measure of precaution?

Sat, 10/29/2011 - 18:32 | 1825155 legal eagle
legal eagle's picture

If you are relying on the government you are blind. Look at all the medicines they approve that do more harm than good, I
i.e cures your incotenamce but gives you internal bleeding. Cronies running the government and business makes you no safer.

Sat, 10/29/2011 - 17:58 | 1825060 PLove
PLove's picture

A little colloidal silver lets you eat about anything, anywhere.

Sat, 10/29/2011 - 17:57 | 1825050 foofoojin
foofoojin's picture

s

Sat, 10/29/2011 - 20:04 | 1825330 Bruin4
Bruin4's picture

Everyone that is interested in food and food / self preservation MUST read "Animal Vegetable Miracle" to see just how far we have fallen and what we can do to really save ourselves from the agra industrial complex. 

http://www.animalvegetablemiracle.com/

Sat, 10/29/2011 - 17:57 | 1825047 foofoojin
foofoojin's picture

s

Sat, 10/29/2011 - 17:54 | 1825046 foofoojin
foofoojin's picture

sprouts grown in the ground and in sunlight actually are still nutritious. the crap that grow on a tray under lights thou is worth less then poop. that is grown with volume not value in mind.

Sat, 10/29/2011 - 19:34 | 1825263 Taint Boil
Taint Boil's picture

 

 

Had Thai the other day .... found fruit flies in the sprouts. Later that day I water jetted the toilet in half.

Sat, 10/29/2011 - 17:58 | 1825064 d_senti
d_senti's picture

What?! How the frack did you post above the other comments?! The all-bold on was on top an hour ago.

Sat, 10/29/2011 - 16:48 | 1824873 oldman
oldman's picture

Bruce,

This was a timely piece; thank you. I also find your sense of humor delightful.

"Meats, poultry and fish +6%

Seafood +6.5% Beef +9% Fresh vegetables +5% Cooking oils +7.5%

These items are all well above the average set by the USDA. The following kept the index low:

 

Processed vegetables +1.5% Beverages +2%

After looking at this I loaded up on canned peas and Coke."

 

I know that you are too bright to be eating canned peas and Coke, so I am still laughing at this article.

Today, I made a list of what I intend to eat for the rest of my life and it totaled only sixteen articles to choose from daily, plus four items that I will eat only once a week. And yes, prices have gone up; my food budget has risen from around twenty dollars a week to where it is nearing thirty-five dollars per week now. Not included is the fifteen dollars each week I spend eating out. Life is getting very expensive for an oldman.

Health and longevity to you, brother      om

 

Sun, 10/30/2011 - 09:38 | 1826069 Implicit simplicit
Implicit simplicit's picture

Hey Old Man. I been thinking. I'm a lot like you were:

http://www.youtube.com/watch?v=KcdSWfWSqGE

 

Sat, 10/29/2011 - 17:26 | 1824974 I think I need ...
I think I need to buy a gun's picture

stay away from sproutz bitchez

Sat, 10/29/2011 - 21:31 | 1825468 Tijuana Donkey Show
Tijuana Donkey Show's picture

Do your own, sprouts done for commercial sale get tainted very easily. Get a $4 sprout lid cover for a Ball jar, and just sprout a bit and eat them as needed. Sprouts are only as good as the water you use to rinse them......

Sun, 10/30/2011 - 01:37 | 1825801 Cathartes Aura
Cathartes Aura's picture

treat your sprouts to a Berkey!

(agree - grow your own, in variety - soo easy, nutritious)

Sat, 10/29/2011 - 16:20 | 1824786 blindman
blindman's picture

http://archive.wbai.org/
Friday October 28 2:00pm
minute 19. food and energy.

Sat, 10/29/2011 - 15:55 | 1824721 Sutton
Sutton's picture

3-5% overnight rates wuould cut commodity prices by 50-80%.  

Sat, 10/29/2011 - 15:27 | 1824657 robertocarlos
robertocarlos's picture

I read somewhere that 12 billion people is doable. Or at least one scientist thinks so.

Sun, 10/30/2011 - 16:27 | 1826710 Kayman
Kayman's picture

With virtual sex and declining sperm counts I doubt we get there.

Sun, 10/30/2011 - 15:37 | 1826627 jackvegas
jackvegas's picture

Twelve billion people are doable?!  Geez, I better get busy.  I've only done about 100.

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