Ethanol. Groceries. 2008 Forecasts
4/18/2008 6:18:51 AM by Mark Gale
Our work in the food industry landed me at a conference this week with economists from Washington, D.C., management from some of the country's largest commodities suppliers and a number of salt-of-the-earth types who produce The Other White Meat. There was much talk about, "The unintended consequences of a bad policy."
Namely, ethanol.
It seems when you start to convert your food (about 34 percent of the corn America produces) to fuel, the ripples extend far beyond the Midwest. Corn powers the country, in case you didn't know. Pigs eat it to make pork chops. Cows eat it to make milk. Chickens eat it to make hot wings. Coke and Pepsi and Dr. Pepper use it to make their drinks sweet. And now your neighbor uses it to drive to work.
What does this have to do with all of us?
The price of corn has tripled in recent years. Long-term contracts that locked in commodity prices at old levels are falling away day by day. Milk and eggs have already taken big price jumps. Beef, pork and chicken have edged up and are going to start stepping up. A public already living under the constant bashing of sub-prime-mortgage-market bad news can now look forward to walking out of the grocery store with less money to spend on other things.
In some ways, I suppose, this could be good for part of our business at Charleston|Orwig: more problems to solve on the Issues side. It's a little frightening, though, to think about what may happen with the economy later this year. I hope the prognosticators are wrong.
Because, unfortunately, all of us are far too familiar with the first thing that marketers cut.