Hungry for relief
Worldwide food crisis hits home; higher prices compound gas costs
BY CHRIS GAETANO Staff Writer
Steve Jacobson, owner of the Amboy Deli in Metuchen, Middlesex County, strikes an upbeat and genial demeanor when talking about his business over the phone. But there is a hint of frustration as well, a frustration shared by people all over the country and, indeed, all over the world due to the rising costs of food and gas.

"My business is fuel and food, so it's kind of affecting everything," said Jacobson.

T

he flour he uses to make bagels has

tripled in price. Wholesale prices in general, he said, have doubled. Oil for french fries has become more expensive, and so have shipments of Snapple and milk, which he said now tack on a fuel surcharge to the overall cost. In turn, he has had to raise prices on his own goods to keep his head above water.

"You don't want to take advantage of people, but you have to stay competitive or you don't stay in business. … It's crazy. You raise prices, you want to be competitive, but it is not easy. It's a mess. It's not an easy time for anyone. It's the first time I've seen it go this dramatically," said Jacobson.

Bob Dick, with Dick's Dock in Metuchen, had similar sentiments, saying that the price of everything has been going up, forcing the restaurant to raise prices on some items as well.

"The prices coming in for wholesale goods are very high. Your meats have gone up, your produce has gone up, dairy, eggs - everything," said Dick.

Dick and Jacobson are two of countless people throughout the world affected by a recent spike in the price of food, which, in turn, feeds into and is fed by a recent spike in the price of gasoline. So far, the U.S. has not been impacted at quite the same level as other countries - full-scale food riots have broken out in Haiti, for example - but the price of food has still created complications for many people in both the public and private sectors.

A

ccording to Joseph Seneca, an economics

professor at Rutgers University, this can have a negative effect on a U.S. economy that is already in an uncertain state. Under our current economic system, consumer spending drives activity. If people are spending more on necessities such as food, they have less to spend on consumer goods, which, to Seneca, may be problematic.

"When you divert expenditures away from other consumer goods and services you or I would have bought, and spend it on these commodities … the effects of our reduced consumption on other things has a negative multiplier on the rest of the economy, and that is how you get the slowdown, feeding on itself," said Seneca.

The economist said the current situation is the confluence of a variety of factors that have influenced each other over the past year. One such factor, he said, has been the rise of India and China on the world stage. As prosperity grows in these nations, he said, their people demand more food, particularly meat, which requires still more grain. This demand inflates prices all over the world.

Another factor, he said, has been the subsidies the U.S. government placed on corn ethanol as a substitute for fossil fuel-based gasoline. These actions caused both demand and production for corn to spike, leading to a rise in price. Compounding this is the fact that the new corn being produced was going not into food, but to fuel, which caused feed for livestock to become more expensive, which then caused meat to become more expensive. Further, because farmers devoted even more of their land to corn, other crops such as soybeans fell off in supply and also became more expensive. And because the U.S. is a major corn producer for the rest of the world, this has reverberated in many other nations. Also not helping, said Seneca, was the tariff on imported ethanol.

The end result is that costs on producers have been passed on to consumers, resulting in higher prices for everyone.

According to some experts, this can lead some New Jersey families to fall - or fall further - into poverty. According to Serena Rice, managing director of the Poverty Research Institute of Legal Services of New Jersey, this is compounded by the fact that New Jersey has a higher cost of living than many other states. According to the group's research, which calculates the cost of living along a self-sufficiency standard with no assistance from public or private institutions, Monmouth, Ocean and Middlesex counties have a cost of living that is 300 percent that of the federal poverty level, which is about $10,000 for a single person.

"The income level which [people] need to cover basic needs is more than three times the federal poverty level, so people below that income level already don't have enough to cover all their basic needs, and so if you add an incremental expense to that, absolutely, people will be falling further behind or … falling below," said Rice.

She said that about 20 percent of the state, according to census data, is living at about twice the federal poverty level.

"So while our median income in New Jersey is high, around $65,000, that's just a midpoint, and that means half the population has incomes below this level and many will fall below basic living costs," said Rice.

Public institutions, too, are feeling the pinch. Daniel Michaud, business administrator for Edison's school district, said that representatives from Chartwells, the company the district contracts with for school foods, announced that lunches will probably be going up in price. At the moment, lunches cost about $2.75 for high school students, $2.50 for middle-schoolers, and $2.25 for elementary school children. These prices have been set by the state. However, Michaud said, the state has recently set new prices where the maximum price for a high school meal would now be $3.25.

Michaud said the cost for a half-pint of milk has already gone up by a nickel, which isn't as harmless as it sounds when one thinks about how much milk a district actually buys.

"That nickel cost us $43,000," said Michaud.

And those rising costs may result in higher prices for taxpayers.

"To maintain services we are providing, we may need to increase prices. … It's a real shame," said Michaud.

Sodexo, a multinational food services company that contracts with many different kinds of institutions such as schools, prisons and businesses, has been doing what it can to stave off the rising prices, according to school services spokeswoman Kate Wester, but prices are still rising.

Between March 2007 and 2008, for K- 12 schools in New Jersey, milk and cheese have risen about 35 percent. Salad dressings have become 18.8 percent more expensive. The price of baked goods has increased by about 15 percent. Paper products like napkins, meanwhile, are 20 percent more expensive.

"In the school environment, we can't limit our services, so we must find other ways to conserve and/or increase participation to offset any cost increases. We are continually looking at ways to make our processes more efficient. Sodexo has strived to make no changes or substitutions to our school menus," Wester said in an e-mail.

Some measures the company has been enacting to control costs include combining deliveries within districts to conserve gas, careful menu planning, reaching out to students to ask them to control their waste, and contests to increase participation.

Not even the people growing and selling the food are unaffected by the price increases, according to Pete Furey, executive director of the New Jersey Farm Bureau. According to Furey, increased costs due to rising fuel prices have been key in preventing farmers from benefiting from increased food prices, though he also noted that farmers account for only about 19 percent of food prices to begin with.

"New Jersey farmers have yet to see the benefit of the higher prices. In fact, surging petroleum makes diesel and fertilizer costs almost unaffordable, yet the farmer won't get paid until the fall harvest. Some commodities that are major here - vegetables, fruit, nursery - won't have any commodity price surge at all," said Furey in an e-mail.

He also downplayed the importance of biofuels, saying that the wheat harvest has actually grown this year.

"There is a lot of [misconception] in the conventional thinking going on right now. Get the facts. We just saw higher wheat harvest numbers for the U.S., yet everyone thinks farmers jumped on the corn bandwagon for ethanol," said Furey.

One area that seems to have been spared so far is the Middlesex County government. According to Jack Garber, the county purchaser, there have been some noticeable rises in food expenses with regard to the county prison and the Meals on Wheels program, with the prison's contract jumping from about $6.8 million in 2005 to $8.9 million in 2008, but he said they were no higher than what would be expected for any new contract after three years.

"It certainly doesn't reflect what you and I are paying in the supermarkets, which have gone up substantially. … It's the menu, really related to the menu in the adult correction facility, and these firms, I'm sure, are buying in bulk. We're not the only facilities they service; they service many, many, and they do have great buying power on the staples required for the menus that we indicate," said Garber.

For the most part, however, things still don't look good for the foreseeable future. According to Seneca, the best thing the federal government can do is to cease the ethanol subsidies and the tariff on imported ethanol. Still, recent events such as the cyclone in Myanmar, a major rice producer, will probably serve to exacerbate the situation further. The problem, he said, is that we all have to eat and most of us have to drive.

Rice, meanwhile, said that programs are in place to serve low-income families and individuals who need help getting food, such as food pantries, though she noted that there has been increased pressure on those programs lately.

For now, however, people are doing their best to weather the storm.

"When you do the big picture and everything goes up, … the price definitely hurts you," said Dick.