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.