Thursday, Oct 02, 2014
Agri Leader

As fuel prices rise, the cost of food escalates


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“Cha-Ching,” is the all-too-familiar sound that we hear at the grocery check out. And it’s also the all-too-familiar sound we hear at the gas pump.

The two are actually closely related. When fuel goes up, so do the groceries.

According to the Daily Fuel Gauge Report, on average a gallon of gas is $3.681. One year ago, the average was $3.567. That’s a price difference of about 4.5 percent.

According to the United States Department of Agriculture (USDA), “The Consumer Price Index (CPI) for all food increased 0.4 percent from March to April, increased 0.3 percent from February to March, and is now 1.9 percent above the April 2013 level.” As you can see, there is a correlation in prices.

“Fuel costs permeate every cost,” said Dan Sleep, supervisor/senior analyst, Division of Marketing and Development, Florida Department of Agriculture and Consumer Services. Sleep explained that everything from fertilizer to equipment to transportation is dependent on fuel. As a fuel costs rise, so does everything else in the agriculture industry, including food.

For farmers, the expenses keep soaring. “Florida Farm production expenses increased approximately 48 percent from 1997 to 2012, while in the U.S. overall, it was nearer 119 percent,” explained Sleep. Although Florida farmers are doing relatively well compared to the industry as a whole, it does not alter the fact that production prices keep rising markedly.

More bad news is that the increases in fuel and food are likely to keep going up. “A conservative outlook is 1 to 3 percent per year for at least the next three years,” said Sleep.

While rising food costs are chipping away at wallets, Americans still pay less than many countries for their food. According to the USDA, Americans spend on average $43 per person per week on food. In France, that number rises to $63, in Greece, it’s $69, and in Japan, it’s $77 (2011). However, in America, we are just not used to paying this much for food. And many simply don’t have the budget for it.

But just because prices rise, doesn’t mean the product sales stay the same. On the contrary, in fact, when prices rise too much, price tolerances come into play. For example, when orange juice prices rise, the sales of orange juice actually drop. “Different products have different price tolerances,” explained Sleep. Some products are more price-sensitive than others, partly due to the necessity of the product, or partly due to the availability of product substitutions that can be purchased instead, such as store brands or off brands.

While we are paying more for food, the availability and selection of food has never been greater. Gone are the days when certain products could be purchased only during certain times of the year. Shoppers these days rarely lack for a selection of foods. “We don’t really have food shortages in our country,” said Sleep who explained that for many countries, especially developing countries, the wide range of available foods is non-existent.

In 1960, the average number of items carried by supermarkets was 5,900, and in 1970, that number increased to 7,800. According to Food Marketing Institute, the average number of items carried in a supermarket in 2013, is now 43,844.

Of course the square footage of a supermarket increased in order to accommodate the larger selection. In 2011, the median square footage of a supermarket was 46,000 square feet. A decade earlier, that number was 38,000 square feet, according to the most recent figures from the Food Marketing Institute (FMI).

Furthermore, thanks to technology, and inventory software, most food items are always in stock. When they’re not, it’s generally not a long wait for them. And, when they are on sale and out-of-stock, most grocers will issue a rain check, where you can pay the sale price for the same item at a later day.

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