Free Markets, Free People

Daily Archives: April 26, 2011

Are food prices higher? The answer is “yes”!

Although you have to do a little comparison of portion sizes to understand that.  It’s an old marketing trick the food industry has used in the past where prices remain about the same, but portion sizes get smaller and smaller.   It started with the recession of 2008. For example:

Unilever U.S. Inc. cut a jar of Skippy peanut butter from 18 ounces to 16.3 ounces in the first quarter of 2008, wrote Dean Mastrojohn, a company spokesman in New Jersey, responding via email to questions. Unilever was facing rising commodity costs – the “same environment as today,” he wrote.

Haagen-Dazs shrank its pint of ice cream from 16 to 14 ounces in early 2009, said Diane McIntyre, a spokeswoman for parent company Dreyer’s Grand Ice Cream Inc. in Oakland, Calif. Its expenses for dairy products, eggs, vanilla, raspberries and other ingredients had risen by an average of 25 percent, she said.

“We just aren’t going to compromise in what we put into the ice cream in terms of quality,” McIntyre said.

The company didn’t want to pass on a higher price to consumers, she added. “The economy was really bad then, and we just didn’t think it was the time to ask them to pay more.”

This month, with many product materials still expensive or rising, Haagen-Dazs did boost prices. The 14-ounce ice cream rose from $4.39 to $4.69, McIntyre said.

It is a pretty common practice, especially in times of rising prices for ingredients:

“You’re seeing it across the board,” said Ann Gurkin, a food, beverage and tobacco analyst for Davenport & Co. in Richmond.

“It’s one way to raise prices” that consumers don’t notice as much, she said. “You’ve seen both package changes and you’ve seen prices going up. I think it’s both.”

Manufacturers do this to combat rising costs, Gurkin said. They’re dealing with higher grain prices because of low harvests last year of corn, flour and soybeans – which go into baking products and snacks. They’re paying more for meat used for soups and frozen meals.

And, like the rest of the nation, they’re battling spikes in oil prices. Petroleum is used in packaging materials, and gasoline and diesel are required to transport goods.

So the reductions continue:

Cans of tuna fell from 6.5 ounces to 5 ounces, according to the commission. Evaporated milk dipped from a 14.5-ounce can to 12 ounces. … A carton of Tropicana orange juice squeezed down from 64 ounces, a full half-gallon, to 59 ounces. … A large box of Kleenex dropped from 280 tissues to 260. A pound of coffee, 16 ounces, dropped 25 percent to 12 ounces, and some brands have started to slim that further, down to 11-ounce bags.

The reasons are obvious:

Smaller packages are more palatable to consumers than price hikes, said Ken Bernhardt, a marketing professor at Georgia State University who specializes in consumer behavior. “It’s a lesser evil than having to pay more.”

The goal is to trim the package “to the point where it’s barely noticeable,” he said.

Indeed.  But the message is this – food prices have been and continue to go up.  At some point, the food industry isn’t going to be able to hide it in the packaging (check out the price per ounce most grocery stores have on the cost labels.  You’ll see what I’m talking about in terms of cost).

If you think gas prices ignite political fire storms, wait until it becomes more obvious that food prices are increasing rapidly (see reference to low harvests and oil prices).  At the point that food manufacturers can’t reduce the package size anymore and must increase pricing because of the increased cost of ingredients, transportation and distribution, you’re going to see real fireworks begin.

My guess?  About the end of this year or the first part of 2012.

~McQ

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Gas price BS

In many cases, there’s not much government can do to stem the rising price of gasoline.  But there’s also pure BS afoot when it claims the following:

Michael Bromwich, the chief regulator for US offshore drilling, on Monday waded into Washington’s growing debate about high oil prices, saying his agency’s pace of reviewing oil and gas exploration plans has no relation to the rising cost of gasoline.

"Even if we permitted the hell out of everything tomorrow — every pending permit, some permits that haven’t even been filed yet — it would not have a material effect on gas prices," Bromwich said. "That’s the simple, clear reality."

Bollocks.  Anyone remember what happened when the Bush administration announced that it was opening the Outer Continental Shelf along both the east and west coast to drilling?  High oil prices immediately began to drop.  That’s because those who speculate on oil were speculating on long-term scarcity – building demand with, at best, the same amount of oil produced.  Such an announcement makes that premise questionable.

And despite claims to the contrary, it doesn’t take 10 years to bring a well in.  Depending on where it is, that can be done in a matter of months or a couple years.  So it dampened the speculation by promising increased production of oil.  Econ 101.

So Bromwich’s claims are nonsense.  Perhaps if they “permitted the hell out of everything tomorrow” it might not have as deep an impact on oil prices as the Bush declaration did, but it would certainly have a positive downward effect on oil prices.

Oh, and if governments are truly concerned about gas prices and how they can keep a little more money in your pocket, a gas tax roll back is always something they can consider:

 

GASOLINE-TAX-MAP-JANUARY-2011

 

Yeah, that’s not going to happen – so Californians, Illini, New Yorkers?  Remember that over 60 cents of the cost of a gallon of gas in your neck of the woods is taxes.  And that’s something government has full control over.

~McQ

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PPP–Libya hurting Obama

Interesting poll especially because the US and Obama are ‘leading from behind’ in Libya and don’t have a prominent role tactically.  But that isn’t changing the fact that the majority of the public, according to this PPP poll, don’t support even that role:

Our most recent national poll found that only 27% of Americans supported the military intervention in Libya to 40% who were opposed and 33% who had no opinion. Democrats only narrowly stand behind the President in supporting the action in Libya, 31/28. Meanwhile Republicans (21/51) and independents (29/42) are considerably more unified in their opposition. [emphasis mine]

As I’ve mentioned many times, the group I always zero in on in any political poll are independents. They are the swing vote in this country.  The 13 point difference would say that on the whole Indies are not happy with the venture.   Somewhat surprisingly, Obama only enjoys very narrow support from Democrats – 3 points.

So all-in-all, Libya is a loser politically.

PPP makes an issue about American’s “not knowing” where Libya is, but still not liking it:

Libya is definitely proving to be a political loser for Obama which is interesting because only a little more than half of Americans, 58%, can actually correctly identify that it’s in northern Africa. 27% think that it’s in the Middle East, 4% think it’s in South Asia, 2% think it’s in South America, and 9% don’t offer an opinion. Voters may not be terribly informed when it comes to Libya but they know they don’t like what they’re seeing.

I take a little exception to that – Libya has and can be considered a part of the Middle East.  As a commenter on their site points out, it has been considered a part of the ME for decades:

Secretary of State John Foster Dulles defined the Middle East as "the area lying between and including Libya on the west and Pakistan on the east, Syria and Iraq on the North and the Arabian peninsula to the south, plus the Sudan and Ethiopia."

So in reality 85% of those who were polled were correct.  It is in N. Africa and is considered a part of the ME.  As for the other 15% – public school scholars I assume.

Finally, even though Libya is unpopular, it may not be much of a game changer in terms of votes:

Libya doesn’t seem likely to be a big vote shifter next year- 52% of voters say it won’t make a difference in their decision on whether to support Obama for reelection or not. But for the voters who do say it could be a game change it’s a negative- 31% say what’s going on in Libya right now make them less likely to vote for Obama compared to only 17% who say it makes them more likely to vote for him.

Libya is one more negative to add to the pile.

As I’ve mentioned repeatedly, Obama has to do something he’s never done before – run on an actual record.  Libya becomes another negative to add to that record. 

~McQ

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IED found on Texas bridge

An ominous sign of the times I’m afraid.  A short blurb from a Texas TV station’s website:

Police say a passerby on the southbound side of Highway 77 noticed what looked like a grenade near the FM 1732 overpass and alerted authorities around 5 p.m. Sunday.

The improvised explosive device or I-E-D was disarmed by a bomb squad using a robot. No one was hurt. Parts of Highway 77 were closed for several hours.

Police are continuing to investigate.

IEDs are simply a terrorist’s tool (you can argue they’re a guerilla’s tool as well, identifying the guerilla as something other than a terrorist – but for the most part in the last two decades, the IED has been used by terrorists).  Sure it can be used to attack conventional forces in a war, but it is also a means of spreading terror, intimidating locals and tying up police forces and the like.   Pipe bombs are “IEDs” and have been used by domestic terrorists for decades.

The fact that the IEDs used on roads in Iraq and Afghanistan has migrated, at least in this instance, to US soil – especially in the area of Texas it was found (Mexican border about as far south in the US you can go) and with the ongoing drug war -  shouldn’t come as a particular surprise.  It could indicate that the “art” of IEDs is being passed around among terrorist groups.  Why it was on this overpass is obviously open to speculation.

However, what isn’t open to speculation is the fact that this nation is seen to be a nation in decline, weaker than it once was and therefore more open to attack.  Additionally the border is porous (well, unless you’re trying to bring in Kinder eggs) and moving IED components through it isn’t a particularly difficult task.

So what was this IED all about?  Trail run?  Test to see if it would be spotted (they apparently didn’t try to hide it).  An attempt to ambush law enforcement?  Some sort of terrorist statement?  None of the above?

Unknown at this point.  But it should be disturbing that an IED has been built and apparently successfully installed here.  It could be the first of many.

~McQ

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