Wednesday, March 25, 2015

Profits First, You Know

"RawBacon" by Jonathunder - Own work.
Licensed under CC BY-SA 3.0 via Wikimedia Commons -
http://commons.wikimedia.org/wiki/File:RawBacon.JPG#/media/File:RawBacon.JPG

CBC is reporting on how food manufacturers are handling their desire to maintain their profit margins. Because consumers are "sensitive to price increases," manufacturers are shrinking volumes rather than pushing a higher price at the till.
While this allows prices to be kept stable, it also allows for massive profit increases.Shrinking a package of bacon from 500 grams to 375 grams is the equivalent of a 25% price hike. You may also have noticed that the slices are thinner as well--to make it look like the same number of portions.
Lay's potato chips--already renowned as being more bag than chips, has also shrunk their portions from 200 grams to 180 grams; a 10% change.
And even in the world of milk, where producers (at least in Canada) are generally guaranteed a fair price for their production by provincial milk quota, dairies are messing with standard sizes. Instead of 1, 2, and 4 cup volumes (250, 500, 1000 millilitres), they have begun selling 237 and 473 millilitre volumes.
From an historical perspective, we are paying a remarkably low portion of our income for food. And here in BC, we depend on California for an amazing amount of our produce. So with the extended drought in Cali and the neglect of our local production, consumers here have been getting progressively squeezed. It just happens to come at a time when corruption in the financial industry has left the real economy reeling worldwide. Massive speculation in food markets led to price spikes in 2008 - 2009, and had various countries stopping exports of various foods (such as wheat from Russia). Since then, things have settled down, but both the race for profits and climate change have kept consumer prices for food on an upward trending line.
Things are not going to get better. Research in Canada has shown that farmers growing patented seed may see production of up to $350/acre, but may see net profits as low as $1.50/acre. This is not a recipe for bringing more farmers on-stream (although it will continue to maintain the massive profits seen by their suppliers and those buying their product).

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