The facts about food inflation

Friday, May 6, 2011

Food price inflation in the double digits has been blamed (or credited, depending upon your point of view) for the unrest that has changed the political landscape across North Africa and the Middle East. But food inflation hasn't struck hard in the United States, at least not early in the year. In March, Maclean's magazine carried an article indicating a rate of only 0.3 per cent in January. The article quoted a report by financial services company CitiGroup.

The reason for the miniscule food inflation rate? The stuff that farmers grow and sell represents a relatively small percentage of the value of the highly processed foods typically sold in stores across the United States (and Canada for that matter). Changes in manufacturing practices can make up the difference associated with those higher costs. The Maclean's article was entitled 'A Reason to Love Cheetos.'

The Business Insider website took the subject further. In an article entitled "In times like these, America's diet of processed food is an economic miracle," contributor Joe Weisenthal explained that stable food prices in the United States "reflect the very high processing content of food. . . . With it, production and marketing margins absorb most of the variation in raw food commodity prices that could erode consumer incomes."

The writer facetiously concluded: "So next time you moan about America's process-food diet, take a moment and realize how much this insulates us. Of course, what this means for our healthcare bill is another story." BF