Big Food: Nowhere to hide

The food retailers of this country continue to paint ethanol as the bad guy in food price inflation.

Last spring the companies hired a big-time public relations agency and poured millions into a campaign that claimed food prices had to go up because corn prices, fueled by ethanol mandates, were climbing. Well, now those corn prices have been slashed in half. But grocery prices continue to climb. Now that it's clear there is no economic relationship between corn prices and retail food prices, Big Food has nowhere to hide.

For more than a year, food manufacturers have been shaving package sizes and raising prices, declaring that they had little choice because of unprecedented increases in the cost of raw ingredients like corn, soybeans and wheat. But with the price of grains and other commodities plunging, why shouldn't grocery prices follow?

Apparently the rules of supply and demand don't work when it comes to padding Big Food's corporate profits. Here's a line from a recent New York Times article:

"Government and industry economists project that the overall cost of food will continue to climb in 2009, led by increases for meat and poultry. A big reason, they say, is that food companies still have not caught up with the prolonged run-up in commodity prices, which remain above historical averages despite coming down from their highs early this year.•bCrLf

Wouldn't it be nice if farmers could say they just haven't •caught up' yet with falling commodity prices? But that's the difference between price takers at the bottom of the food chain and middlemen who can set their own prices.

If you recall, the Grocery Manufacturers Association led a campaign last summer to blame ethanol mandates for the world's climbing food prices. GMA even started a web page, Food before Fuel, to defend its position.  

It turns out now that the GMA strategy made a lot of sense for its 3,000 or so Big Food clients, including Safeway, Kellogg, Kraft and other large-scale food retailers. By painting ethanol as the bad guy, GMA can keep pointing the finger at government biofuel mandates to justify continued high food prices, deflecting criticism onto government policies even now as commodity prices have plunged.

On Nov. 24, the Ohio Corn Growers Association held a press conference, taking Big Food to task. "The price of corn has dropped to more than half its high point this past summer," said Dwayne Siekman, executive director of the Ohio Corn Growers Association. "And the question we're asking: Where is the drop in food prices?"

Prices are not coming down, but profits at food companies continue to go to levels that no other industry has seen in the United States, he added.

I guess GMA believes if it keeps telling its tale, people will eventually believe it — even when it makes absolutely no economic sense.



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