High Prices a Problem for Corporations, Consumers Alike

Everyone from the CEOs of huge corporations to stay-at-home moms are feeling the squeeze of the high cost of living. Soaring food and fuel prices are leaving their mark in grocery stores, on the roads and in homes across the United States.

The U.S. Department of Agriculture recently estimated that food prices will climb 4.5 to 5.5 percent this year and another 4 to 5 percent in 2009. Many are scrambling to find new ways to survive in this volatile economy. The “trickle-down” effect has become obvious.

With the increased cost of living, many farmers are losing money with each chicken and cow they sell. Grain farmers are hurting from rising fertilizer and fuel prices as well. When those at the source of our food supply are hurting, the high cost of inputs are sure to be passed on to the consumer.

“It costs $1,000 to fill up some farm tractors every time they pull up to the diesel pump with an empty tank,” said Mark Schneidewind, Illinois Farm Bureau manager for Will County. In an Aug. 22 article in the Morris Daily Herald, he explained that anhydrous ammonia, a common fertilizer, has risen from $200 per ton to more than $1,000 in the past two years.

Like farmers, food manufacturers also must tighten their belts. Though often seen as responsible for hiking prices, companies like General Mills are suffering, too. According to an Aug. 8 Wall Street Journal article, to save dwindling profits, General Mills and other companies like Pilgrim’s Pride, Sara Lee and Tyson Foods have been forced to charge more for smaller boxes of cereal, cartons of ice cream and jars of mayonnaise.

The next place increased prices have a significant impact is in the grocery aisles and the wallets of families across the U.S. Already driving less, opting out of their usual activities and switching to more fuel-efficient cars, moms and dads are watching their food purchases closely. Even children at school can feel the effects of the market. Schools in many states are being forced to raise the price of all lunches, including their “low-cost” meals and are reducing the variety of foods they offer.

“We were so used to getting into the car and going places, trying new things,” said Jennine, a suburban New York mother of two. “I try to drive only as necessary so I can make a tank of gas stretch for two weeks. You have to think about how you do food shopping and where you are taking the kids.”

On the upside, makers of items like bicycles and wood-burning stoves are enjoying increased sales. Online and bulk shopping are also on the rise.

“High energy prices are forcing consumers and businesses to reconsider both short-term and long-term decisions, from where to go on vacation to where and how to organize product lines,” said Scott Horsley in his Aug. 13 NPR article. “Some of these changes will be long-lasting.”

The endless cycle of finger pointing is obviously not helping anyone solve the problem of higher prices. What is the solution? Are these market conditions here to stay? Let me know what you think.

No comments: