April 3, 2008 —
With food prices rising across the board due to higher fuel costs and a spike in the commodities markets, you might think that the organics boom would be the first suffer — especially in the midst of a recession. The logic goes that since wallets are tightening across the country, consumers will turn to cheaper meat and produce, eschewing concerns about pesticides, growth hormones and sustainability issues. And while there is certainly some truth to this — one need look no further than the gradual decline in Whole Foods' stock price since the beginning of the recession for evidence — the long term benefits of a changing food economy might outweigh the negatives.
The impact of higher corn and grain prices on processed foods may actually end up going a long way towards leveling the playing field with healthier, more sustainable competitors. Take corn syrup, a staple ingredient of fast food and microwave dinners. With the price of corn skyrocketing in the past few months, and many farmers forced to cut production for the purpose of crop rotation — corn had become such a popular cash crop in recent years, many farmers were overproducing it — the prices of processed foods that use corn syrup will rise, and profit margins associated with processed foods will shrink.
But by far the greatest pressure on the food economy lately has come from rising fuel costs. This effects the local organic farm that has to pay twice as much to transport a truck filled with spinach to the nearest outdoor market or health food store, but for a company like McDonalds, these increased costs are multiplied several times over. The grain that feeds McDonalds beef now costs more and has to be transported to the cows, the cows have to be driven to slaughterhouses, their meat has to be taken to processing plants, and finally to the restaurants. This multiplier effect is present in every product a company like McDonalds sells, and if current trends continue, the 99 cent menu could become a thing of the past.
An article in yesterday's New York Times speculates on the impacts that this could have on the American diet. Will we still stuff our faces with value meals as the effects of an economic downturn make it dramatically less expensive to dine in? Will restaurant fare — generally a far healthier alternative choice than drive-through — benefit from a shrinking price gap between it and fast food? Most importantly, will America's long term eating habits continue to improve even if the food economy one day returns to normalcy?