Weekly Opinion Editorial
BIG YELLOW TAXI!
by Steve Fair
Consumers in
the United States spend an average of 8.6 percent of their disposable personal income on food. That is divided between food at home (5.0
percent) and food away from home (3.6 percent). Americans spend a smaller share of their
household budget on food than any country in the world. In Pakistan, the average person spends 41.4
percent of their money to buy food, Nigeria 56.6 percent. Even the countries that border the US spend
more- Canadians spend 9.6 percent, Mexicans 23.3 percent. The reason Americans spend less of their
income on food is due to the competence of the U.S. food supply chain.
Efficient U.S. producers,
processors and retailers are unequaled in the world from taking food from the
field to the plate. That efficiency has
resulted in reduced shelf prices for American consumers vs. the rest of the
world. 2022 begins with carry over
logistic challenges, labor shortages, inflation and ever-changing weather from
2021. The pipeline in the food industry supply
chain continues to trickle, not flow. Three observations:
First, Americans are spoiled. They are not used to seeing empty shelves at
their grocery store or having to wait for products to get back in stock. In other parts of the world, out of stocks are
commonplace. The American food industry has
been so reliable and efficient for so long that consumers have taken it for
granted.
One of the primary reasons for the current
empty shelf situation is wholesalers/retailers keep their inventory of warehouse
stock to bare minimum levels. This
allowed them to keep their monetary investment lower. Food processors mirrored that philosophy and
embraced a ‘just in time/produce to order’ strategy. They also maintained little or no floor
stock. That worked for years until there
was a major disruption in the logistics process. When millions of people stayed home and
isolated due to the pandemic, they hoarded and consumed more food. That depleted what was in the supply pipeline
and it has never recovered. Moving
forward, the food industry must embrace a different inventory model.
Second, food prices will go up in
2022. Weather plays a significant factor
in commodity prices of most crops(oil seed, grains, fruits, vegetables). Most of the crop prices are up. Cost to produce for food manufacturers is significantly
higher (ingredient costs, labor). Wholesalers and retailer’s freight and labor
costs have increased. When those in the supply chain have increases, they have
to pass them through and consumers ultimately pay the higher price at the shelf.
Third, government can’t fix it. President Biden and Congress are debating how
to fix logistics and the broken supply chain, but while energetic, it is
worthless. Throwing money at it will not
work. The administration claims the
inflation Americans are experiencing is ‘transitory’(not permanent.), but there is no sign it is going away.
Most economists believe inflation is here
for at least a year.
Government
interference in the food business is part of the issue. The best hope Americans have to get back to
normal is food processors, farmers, and the trucking industry to find solutions
to fix the supply chain. Farmers have a
choice what they plant and their choice impacts what American consumers pay for
products. The best thing the government can
do is roll back mandates and get out of the way.
In 1970, Joni Mitchell, a Canadian folk
singer, wrote and recorded, “Big Yellow Taxi.” The chorus asks, “Don’t it always seem to go
that you don’t know what you’ve got till it’s gone?” Americans are asking that question every
time they go to their local grocery store in 2022.
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