Mike the Mad Biologist

The War on Pizza

I’ve already covered the War on Beer, but now, pizza is taking it the chops too. Have they no decency? From the Back Bay Sun:

The changing economy is not only affecting the housing market and the prices at the pump – it’s also taking a bite out of local pizza makers’ profits. The rising costs of two key ingredients in the perfect pie – flour and cheese – have been making pizza joints around the Back Bay take a second look at their production costs and even their pizza prices.

“The costs are just getting crazy,” says Doug Ferriman, who would know as the owner of Crazy Dough’s Pizza at 1124 Boylston Street. “When product prices double, that’s when it gets scary. Our prices will have to go up if this continues.”

In fact, the average U.S. price of wheat has more than doubled in the past year, according to the U.S. Department of Agriculture. In a February USDA report, the price of wheat averaged $10.40 per bushel, up from $7.93 in January and $4.71 in February of 2007. And the news isn’t much better regarding the price of cheese. In a report that tracked prices through Feb. 23, the USDA said the average price of a 40-pound block of cheddar cheese was $75.20, or $1.88 per pound, compared with $52, or $1.30 per pound, a year ago.

Analysts are blaming a number of factors for these huge price hikes, including the increased focus on corn for bio fuels that is limiting the supply of wheat for flour. Others point to lower-than-normal cheese production and higher foreign demand.
Whatever the reasons, the local pizza makers are feeling the effects – especially the mom-and-pop shops or those with just a few locations who may not be able to broker better deals with suppliers.

Ferriman owns two Crazy Dough’s locations – the one on Boylston and one in Harvard Square. He says the situation has been throwing pizza shops and bakeries into a tail spin, and he’s been looking at all aspects of his business to try to cut back where he can without compromising the quality of his product. Crazy Dough’s hasn’t raised prices yet, but Ferriman has been taking informal polls of his lunchtime customers in the past weeks to see how they would react to a modest price increase, explaining the reasons….

She says just recently, the price of flour has gone from $37 a bag to $50 a bag, and Bostone goes through at least 20 bags a week. And she says suppliers are telling her this isn’t a reality that will go away any time soon. King will be looking into the factors she can control – such as portion control and labor scheduling – to try to make up for her cost increases without having to raise prices further.

Fortunately, my carefully calibrated and controlled diet of Ring Dings and Yoohoo! will be relatively immune to these food price increases. Kidding. But the rapid inflation in food prices is serious:

After nearly two decades of low food inflation, prices for staples such as bread, milk, eggs, and flour are rising sharply, surging in the past year at double-digit rates, according to the Labor Department. Milk prices, for example, increased 26 percent over the year. Egg prices jumped 40 percent.

Escalating food costs could present a greater problem than soaring oil prices for the national economy because the average household spends three times as much for food as for gasoline. Food accounts for about 13 percent of household spending compared with about 4 percent for gas.

Rising food prices can be particularly corrosive to consumer confidence because people are so frequently exposed to the cost increases. “It’s the biggest risk we face economically, and it might be the thing that does us in,” said Rich Yamarone, director of economic research at Argus Research Corp. in New York. “There’s nothing really worse than having a job, making money, and forking most of it over just so you can have the same amount of food. You’re running in place, and it really weighs on you.”

As with energy, higher food costs cut into discretionary income that buys everything from cars to computers to movie tickets and drives the consumer-based US economy. Falling home values and a faltering stock market have battered consumer confidence, spurring a retrenchment in spending that is contributing to recent job losses and pulling the economy toward recession.

Many analysts expect consumers to keep paying more for food. Wholesale food prices, an indicator of where supermarket prices are headed, rose last month at the fastest rate since 2003, with egg prices jumping 60 percent from a year ago, pasta products 30 percent, and fruits and vegetables 20 percent, according to the Labor Department.

For many adults, they have never had to put together a household budget under the specter of strong food price inflation. If this keeps up for another year or two, it will rival the inflation in food prices that occurred during the Nixon era–and resulted in the economic policies that led to the rise of megascale agriculture. As I put it when I discussed this months ago:

Meeting with economic writers last week, President Bush dismissed several polls that show Americans are down on the economy. He expressed surprise that inflation is one of the stated concerns.

“They cite inflation?” Bush asked, adding that, “I happen to believe the war has clouded a lot of people’s sense of optimism.”

Well, the war has clouded “people’s sense of optimism.” But paying a lot more for food just might have something to do with clouding “people’s sense of optimism” too.

Let them eat “computers, cameras, clothing and shoes.”

This is going to become a huge political issue. There’s just no more give in too many people’s personal budgets.

Comments

  1. #1 Michael Schmidt
    March 10, 2008

    There may be a silver lining here, as the price increases are closely tied to increasing energy prices, and in seeking to lower their food bill, people may shift to dietary choices that are more energy efficient and better for the environment. But that’s MAY, not WILL, because people may opt for worse nutrition rather than more energy-efficient nutrition. Instead of substituting energy-intensive beef protein with cheaper complementary vegetable protein sources (ye olde lentils & rice), they may just decide to eat more cheap starchy white bread.

  2. #2 PhysioProf
    March 11, 2008

    Another reason for this is the insane monetary policy of the Federal Reserve.

  3. #3 WeeDram
    March 12, 2008

    And yet waste in the food supply chain is mind-boggling. (http://www.cbc.ca/thecurrent/media/200803/20080311thecurrent_sec3.ram) As transportation and input costs increase, expect “market” adjustments; for example, the “100 mile diet”, more home gardening, and others yet to be imagined.

    Also expect the large, corporate agribusiness (what an offensive term) interests to continue to cut whatever corners the feel they can achieve through lobbying-bought regulatory relief and reduced vigilence. Downer burgers, anyone?

  4. #4 Barn Owl
    March 13, 2008

    It would be great if people made more energy-efficient and environmentally-friendly food choices, but I just don’t think that victory (against recession) gardens and diets for a small planet are going to be widespread trends in the US. We are not my grandparents’ generation, and we’re not good at being frugal and “going without”. Most suburbanites here have plenty of yard space for a garden, and the growing season allows two crops of tomatos, peppers, and the like each year. Our proximity to the Valley and to Mexico allows access to a wide variety of fresh fruits and vegetables throughout a good part of the year, yet many people fail to take advantage of these opportunities.

    Secretary of the US Treasury Paulson was just interviewed on NPR, and refused to use the word “recession”. Foreclosures on the increase, rising food prices, falling dollar, rising energy prices…but we’re doing fine, right? I’ll get that $300 check in May, and do my part to stimulate the economy, right? No worries.

    I know very little about economics, but my impression is that wealthy individuals, whose income arises from investments, overseas money, Big Oil, etc., are doing quite well. They’ll benefit from what is turning into a service economy, with extremely wealthy individuals at the top, hiring workers to clean their houses, care for their kids and elders, landscape their properties, and massage their backsides. I have friends who are in this wealthy position, and they support a mini-economy of nannies, horsetrainers, landscapers, house cleaners, pool cleaners, fence-stringers, and guesthouse builders. They tell me that many people are desperate for work of any kind, and this in a region that has not yet experienced the big foreclosure crisis. I think the US is in trouble, far deeper than just the rising food prices indicate…most people are not very good at “making do” and “getting by”, and are instead very good at running up huge credit card debts.

  5. #5 metin2 hile
    December 21, 2010

    small planet are going to be widespread trends in the US. We are not my grandparents’ generation, and we’re not good at being frugal and “going without”. Most suburbanites here have plenty of yard space for a garden, and the growing season allows two crops of tomatos, peppers, and the like each year. Our proximity to the Valley and to Mexico allows access to a wide variety of fresh fruits and vegetables throughout a good part of the year, yet many people fail to take advantage of these opportunities.

    Secretary of the US Treasury Paulson was just interviewed on NPR, and refused to use the word “recession”. Foreclosures on the increase, rising food prices, falling dollar, rising energy prices…but we’re doing fine, right? I’ll get that $300 check in May, and do my part to stimulate the economy, right? No worries.

    I know very little about economics, but my impression is that wealthy individuals, whose income arises from investments, overseas money, Big Oil, etc., are doing quite well. They’ll benefit from what is turning into a service economy, with extremely wealthy individuals at the top, hiring workers to clean their houses, care for their kids and elders, landscape their properties, and massage their backsides. I have friends who are in this wealthy position, and they support a mini-economy of nannies, horsetrainers, landscapers, house cleaners, pool cleaners, fence-stringers, and guesthouse builders. They tell me that many people are desperate for work of any kind, and this in a region that has not yet experienced the big foreclosure crisis. I think the US is in trouble, far deeper than just the rising food prices indicate…most people are not very good at “making do” and “getting by”, and are instead very good at running up huge credit card