Will Food Prices Continue to Rise in 2011?
“Food inflation will become America’s top crisis,” in 2011 reads one of the top 10 forecasts issued by the National Inflation Association (NIA) this morning.
“Americans can cut back on energy use,” the NIA surmises, “by moving into a smaller home and carpooling to work. They can cut back on entertainment, travel and other discretionary spending.
“However, Americans can never stop spending money on food.
“The days of cheap food in America are coming to an end,” the forecast continues. “The recent unprecedented rise that we have seen in agricultural commodity prices is showing no signs of letting up.”
Indeed. You’ve already seen sugar futures at a new 30-year high. Coffee futures reached a new 13-year high last week. Orange juice, corn, soybeans and palm oil have all stretched to near three-year highs in the past week or so.
Last month, global food prices surpassed their mid-2008 records, according to a report out this morning from the United Nations Food and Agriculture Organization (FAO).
The FAO’s food price index clocked in at 214.7 in December – up 4.2% in just a month, and breaking the previous record of 213.5 in June 2008.
“It will be foolish to assume this is the peak,” says FAO senior economist Abdolreza Abbassian. He calls the situation “alarming,” but dutiful bureaucrat that he is, he won’t call it a “crisis.”
Heck, even the Super Big Gulp ain’t what it used to be:
Now with 9% less!
7-Eleven has surreptitiously shrunk its famous beverage container from 44 ounces to 40. Seems people started noticing it last summer…but only this week did the lid get blown off (so to speak) with a column in the Austin American-Statesman.
An alert reader compared the Super Big Gulp with a true 44-ounce container from a competitor…and it came up four ounces short. 7-Eleven confirmed it did make the change. But pressed for an explanation, a hapless PR flack could merely say, “We don’t have announcements; we just have information, so I’m not sure if we ran an announcement or not.”
“This is called short sizing,” says Resource Trader Alert editor Alan Knuckman, who has almost single-handedly propped up 7-Eleven’s Big Gulp business in recent years. “And it could have come from two different commodity-related angles…
“First, maybe because corn prices have rallied so much in the past 12 months, this is indicative of a rise in the price of corn syrup.
“Or second, maybe – since the cost of the cup is worth more than the soda inside – this was an energy saving technique in the face of higher energy prices. Either way, they’re clearly shrinking the size of a beverage to increase margins.
“But!” Alan continues. “This may not be the only place we’ll see a change. If 7-Eleven is REALLY watching their commodity prices closely, they’ll soon realize that the price of coffee has nearly doubled since last year.
“The best way to make this whole short sizing debacle a nonissue” according to Alan, “is to simply profit from the same forces that are shrinking our servings. In 2011, as always, it will all come back to commodities!”