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Having to Put Food Costs Ahead of Quality in a Recession Isn't Acceptable

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Global food prices have been volatile for a couple of years now, leaving shoppers to make an uncomfortable choice between the cost of their shopping in a recession and buying healthy, natural foods.

So how have food shopping habits changed over this period? What has been the impact on the growing trend for natural, healthier foods and can anything be done to make food prices less volatile?

Oil price rises in early 2008 had a major impact on food prices - both because of the increased costs to farmers of producing them, plus increased costs of packaging materials and of transporting to the shops.

Alarm signals began to sound about food security and food scarcity in some parts of the world with large populations already living in extreme poverty and less able to absorb rising costs.

It was noticed in the more prosperous parts of the world, like the USA, that shoppers were becoming more aggressive in buying products on special offer.

Particularly in staple commodities like milk, bread, meats, coffee and cheese where there is less of a perceived difference between branded and private label quality they were also beginning to trade down to private label and value brand.

Then, in the autumn of 2008 came the credit crunch and by June 2009 the BBC was reporting that in the UK "one of the first things we've tried to cut back on is our spending on food".

Over the previous year food prices had risen by 8% and people had cut back on eating out in favour of staying in and cooking from scratch.

Local independent shops were reportedly receiving £50million less in sales and organic food sales were down 11% year on year.

While it was clear that organic and locally-produced foods - perceived traditionally to be more expensive - might be a loser the picture has turned out to be mixed.

For the year 2009 consultancy and research firm Organic Monitor estimated overall growth on organics in Europe was between 2 and 6 per cent, a drop from the double-digit growth rates of previous years but still unusually strong for a premium priced category.

Within Europe there were significant differences between countries. Growth rates varied according to the severity of the recession with organic sales worst hit in the UK and Spain - countries which were both badly affected by the recession, so consumers traded down to ordinary products and switched to cheaper retailers where organics have a weaker presence.

In Nov 2009, according to data compiled by the Steel Can Recycling Information Bureau, consumers suffering under the credit crunch were also eating 20% more canned food and drink than in 2007. Figures from Mintel highlighted a sales rise, with canned food worth £718m in the UK, with a predicted rise to £792m by 2012.

Shoppers in the US and UK were also buying cheaper custs of meat with 40% of them saying they had changed the way they bought meat and poultry compared with before the recession.

So where are we now?

While the recession has been declared officially over in most places, the after-effects are still being felt by people who have lost their jobs or gone onto part time working.

In the year to March 2010, UK food prices rose 1.2 per cent year-on-year, according to the British Retail Consortium's price index.

One factor that put upward pressure on prices was the return of VAT to 17.5 per cent on 1 January 2010. But also commodity price changes put upward pressure on food retail prices as fuel prices and packaging material costs increased.

In December 2009 The Food Channel predicted that a top food trend for 2010 would be for consumers to focus on buying pure, simple, clean and sustainable basic ingredients and shift from convenience foods to scratch cooking

Despite the rise in food prices there are signs that people are buying organic again. This year organic sales are expected to creep back up by 2-5%, according to the Soil Association's Organic Market Report 2010.

Meanwhile the squeeze on farmers to produce more at lower costs continues and the EU has approved a £20million farming crisis fund to give limited amounts of aid of up to €15,000 (£13,214) to UK farmers affected by the economic crisis until 31 December 2010.

So the pressure is still on to find more sustainable ways of farming to satisfy both consumer demand for healthy, natural, chemical - free food and the farmers' need to increase production in a sustainable way that preserves the quality of their land allows them to earn a reasonable living.

The CEO of the main US-based company researching and developing low-chem agricultural products has agreed on record that organic is currently a "middle class" option and he believes natural, healthy foods should be available affordably to everyone.

One way to achieve all this may lie in the new generations of biopesticides, biofungicides and yield enhancers that companies like his are increasingly developing to replace the older and more damaging chemical agricultural products being taken off the market.

Marc have been writing articles for nearly 2 years. Come visit his blogs more often for tips and advice that helps people with the interest for recession 2011 and great passion and knowledge for  recession proof businesses and all the different options & providers available in the market today. Find out for more info also here RECESSION2011.NET

Will the UK Enter Into Recession

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A recession is a period of negative economic growth for 2 consecutive economic quarters. In the post war period UK economic growth has been characterized by the boom and bust economic cycles. A period of growth is followed by high inflationary growth and then a downturn in the economy. However since 1992 the UK has experienced a long period of economic growth, the longest period of uninterrupted growth this century. It appears the UK has temporarily avoided the threat of recession, but although forecasts remain positive there are many factors that could push the UK into recession.

Possible causes of a recession could include:

1. Fall in house prices. The UK economy has a strong dependency on the housing market. Most people own a house, renting is not common like on the continent. Borrowing costs are a high % of income because people take out large mortgages.

If house prices were to fall there would be a negative wealth effect which would adversely affect consumer spending and cause a fall in AD. Some people say house prices are overvalued because of speculation. However others argue the UK market remains strong because of shortage of supply and constant demand. However the housing market is very susceptible to even a small rise in interest rates. If interest rates rise it would increase mortgage costs and there would be a big fall in demand and therefore consumer spending.

2. In addition record levels of consumer borrowing means the economy is likely to be significantly affected by any rise in interest rates. The savings ratio is at an all time low. If interest rates were to rise then it would cause great pain to consumers.

3. Decline in Manufacturing sector. For a long time the UK manufacturing sector has becoming more uncompetitive with the rest of the world. Mainly because of competition from Asian countries with lower labour costs. In this sector the UK is experiencing rising unemployment, causing unemployment to go back above 5% (ILO Labour Force Survey)

4. Government borrowing is high. To meet the shortfall the Govt may have to increase taxes. This would have the effect of reducing consumer spending.

5. Global downturn. If the world economy slows down there will be less demand for British exports and also reduced economic confidence. This is very significant with increased globalisation of the world economy.

6. It is argued interest rates are being kept artificially low by the demand by China and other Asian countries to buy UK and especially US debt. If for whatever reason this was to end. Interest rates would rise to try and combat the imbalances in the current account and domestic levels of savings.

7. Rising price of oil. In the past 2 years the price of oil has surged ahead in the past this was often sufficient to cause a recession. This time has been different because the rising price has been caused by high demand rather than supply shocks. However if the price of oil was to continue to rise (as is predicted by many oil analysts) this would put pressure on business costs, causing inflation. To maintain the governments inflation target the MPC may increase interest rates. Thus triggering a fall in AD

However growth in the UK is forecast to be 3% for next year. This is because consumer spending is forecast to remain steady against a backdrop of low interest rates and low inflation. However if there was to be a moderate rise in interest rates the growth rates could prove to be over optimistic (as they were last year). This could be sufficient to reduce consumer and business confidence. Thus starting a recession.

Jake have been writing articles for nearly 2 years. Come visit his blogs more often for tips and advice that helps people with the interest for recession proof businesses and great passion and knowledge for  recession 2010 and all the different options & providers available in the market today. Find out for more info also here RECESSIONOVER.ORG