GoodFuels

Investigate Food Companies

The October Consumer Price Index offers definitive proof that the food companies are sticking it to consumers even though prices for virtually everything else are down.

A report by the Renewable Fuels Association this week notes that “the excuse for these prices hikes given by big food companies does not pass the smell test.” That is an understatement. It literally stinks to high Heaven. What food companies are calling “sticky prices” really amounts to “sticky fingers.” They are out and out stealing from American consumers and Congress should be pulling them in for hearings to explain themselves.

According to the report:

Big Food often suggests a “lag effect” exists before changes in commodity prices are reflected at the retail level (they say that’s why food prices haven’t come down, despite the plunge commodity prices). However, it is clear there was no “lag effect” in early 2007. When the producer price index (PPI) for farm products increased rapidly, food companies reacted quickly, as demonstrated by the accelerated trend in the consumer price index (CPI) for food. And as producer prices for farm products have dropped dramatically since June, food inflation continues to increase at a faster‐than‐normal rate.

You can see this in the graph (for a better view, see RFA’s report). What is more outrageous is the food companies’ higher‐than‐expected earnings for the quarter that ended in September 2008, due in large part to higher prices for consumers.

Tyson Foods—the world’s largest meat processor and an outspoken opponent of renewable fuels—reported a 50 percent increase in net income in the quarter ended September 27, 2008.4 Tyson’s latest earnings press release cited “higher average sales prices” for pork, beef, and chicken as a major reason for the boost in revenues.

With the economy the way it is today, consumers should not be paying higher than average prices for food in order to increase profits for food companies. This is just wrong and the American public should be demanding that something be done about it immediately.