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Why are food prices still elevated?

By Staff | Nov 21, 2008

To the Editor,

As farm commodity producers who also shop at the grocery store, we think it’s time all consumers are aware that the grocery industry is taking advantage of recent events, and their doing so is directly affecting all of us.

Earlier this year, as media reported high grain prices, food manufacturers were quick to raise prices, linking their increases to the cost of farm commodities, in addition to fuel. They targeted the production of ethanol, in particular, and waged an aggressive campaign, asking Congress to rescind the renewable fuels mandate.

We all know fuel prices are now approximately half of what they were. The general population may not be as aware that farm commodity prices have also fallen by approximately 50 percent. Meanwhile, food prices remain high and large food companies are reporting bigger profits.

According to FoodPriceTruth.org, Proctor & Gamble in August reported net quarterly earnings up 33 percent; Kraft recently reporting its quarterly operating income up 27.1 percent from a year ago; Sara Lee earnings showed a 61.2 percent increase in the third quarter of its fiscal year, compared to a year ago.

These are just a few of the companies reporting greater profits this year than they were a year ago, and in their own news releases all attribute higher profits to price increases, even as consumers are dealing with the economic challenges that accompany falling housing values and a shortage of credit.

This situation should lead all of us to question whether farm commodity prices were responsible, in the first place, for the rise in food costs. Food companies are quick to take advantage of an opportunity to raise prices, but, when their costs go down, they maintain the higher prices and increase their profits.



–John Heisdorffer

Iowa Soybean Association president, Keota farmer

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