By Mike Doherty, senior economist and policy analyst, Illinois Farm Bureau.
It’s summertime and the livin’ is never easy for Illinois corn farmers — at least during this summer, when drought is decimating their crops and ’weather scares’ are bouncing the markets around. But it’s also the season for the media to jump on the food-prices-are-rising bandwagon.
In fact, Fox Business News recently ran an article about how food prices are on the rise and how consumers can fight back. They interviewed Ed Butowsky, a managing partner at Chapwood Capital Investment Management, who said that, “Wheat and milk are both imbedded in most foods, so if prices for those commodities go up, then those costs will get passed onto the consumer…”.
Butowsky, with his 22 years in the financial services industry and as an internationally recognized expert in the investment wealth management industry, apparently was unaware that grain prices have little impact on most food prices.
That is not to say that Butowsky was completely wrong — his comment just mislead the consumer, who wants to know the primary reason for food price increases. Butowsky could have just as easily said, “Oil, gasoline and diesel prices are imbedded in most foods and when those costs go up, as they have until the last two months, you’re going to see an increase in food prices.” He would have been more on-target.
In fact, when food prices rise, the increases are usually due to increased prices in energy, fuel, transportation, processing, packaging and fluctuations in overseas demand and the export market for many finished U.S. products, not the underlying price of wheat, corn, or soybeans.
I wouldn’t want Fox News to get bogged down in having to dig up such technical information as ‘food prices,’ though. After all, it took me about 10 seconds to find the actual food prices increases on which Butowsky was commenting. I typed “Bureau of Labor food prices” into Google search and, at the top of the very first table that appeared, read that the price of flour, a food product made from coarse grains, has actually declined in price during the last 12 months. Ooops.
Fox News may want to consider other experts than investment portfolio managers for viewpoints on rising food prices, such as one of the dozens of top-notch economists who work at the Bureau of Labor Statistics, or the USDA’s Office of the Chief Economist or their Economic Research Service and who track food prices as part of their jobs.
In the end, I suppose you could say this isn’t just a commentary about jumping on the bandwagon — it also is a commentary about leaping to conclusions and about the value of asking questions of the right people.
Rachel Torbert
