Flash in the Pan

I've been hearing stories of late about rising food prices, driven by higher fuel prices, increased use of corn for ethanol production, and a low exchange rate on the dollar, making it cheaper for foreign consumers to buy grain. On a local NPR station this morning, the estimates being tossed about were around 5%. But then the same report was talking to a local grocery chain, where a representative was talking about 5-pound bags of flour starting at $4.

But it seems to me that the price even six months ago was maybe $3.60. Add 5%, and you get a bit under $3.80. I'd figure that if wholesale prices were going up a set percentage, then you could expect retail prices to go up by the same percentage. But clearly the percentage is being doubled. So, are the experts deliberately making their estimates too low to try and stave off political heat? Or is someone jacking up the price even higher to skim extra profit? Or is my memory of pricing going wrong? Maybe it's me, but something seems odd. I will note the following about Archer Daniels Midland Company (or ADM, as they've tried to rebrand themselves) - one of the world's largest grain processors:

Fiscal Year	Revenue	Gross Profit	Percentage Profit
2007	44,018.0	3,237.0	4.9%
2006	36,596.1	2,965.8	3.6%
2005	35,943.8	2,431.3	2.9%

In other words, the company's revenue has jumped 22.5% from 2005 to 2007, but gross profits are up 33%. Maybe it's not me.

Labels: ADM, Archer Daniels MIdland, business

Apparently, in a quest for greater profits, major chocolate manufacturers in the U.S. are petitioning the FDA to redefine chocolate. Under the proposed change, manufacturers could use vegetable fat instead of cocoa butter and whey instead of whole milk or milk powder. According to Bloomberg, the Chocolate Manufacturers Association includes Hershey, Nestle, and Archer Daniels Midland, and you can bet that if any of these enormous companies objected, the chances that the proposal would have been sent in would be slim. Thanks to manufacturer Guittard for breaking ranks and publicly objecting to this farce and for enlisting companies like See's Candies (good chocolates and owned by Warren Buffet's Berkshire Hathaway). As someone from See's says (sorry, couldn't resist), "If the margarine manufacturers could call their product butter instead of being required to call it margarine, wouldn't it strike the consumer as being odd?'' That's effectively what's happening here. The Bloomberg report had this, as well:

Hershey, the largest U.S. candy maker, says that broader labeling is needed to keep up with changing consumer tastes. "The petition would modernize all food standards, increasing flexibility to accommodate changes in technology," Kirk Saville, spokesman for the Hershey, Pennsylvania-based company, said in an interview. "Changes, if adopted, would provide the flexibility to make changes based on consumer taste preference, ingredient costs and availability, and shelf life."

Or changes based on profits. Unfortunately, mass manufactured chocolate is so far below the good stuff in quality that many people may have lost the ability to tell whether it is getting even worse. Today is the last day for public comment - use this form.

Labels: ADM, Archer Daniels MIdland, Berkshire Hathaway, chocolate, cocoa butter, Guittard, Hershey, Nestle, See's Candies, Warren Buffet