Food: Behind the Boycotts: Why Prices are High

Behind the boycotts:

Why Price are High

Supermarket boycotts spread like butter on a sizzling griddle last week. Encouraged by reports that several shopping-cart blockades the week before had forced the great chains to lower some prices, housewives marched in more than 100 cities. Placard-waving pickets popped up in places as disparate as Pittsburgh and Cedar Rapids, Iowa, Washington, B.C. and Lubbock, Texas. Esther Peterson, the former Utah schoolteacher who is the President's special assistant for consumer affairs, egged on a band of New York City demonstrators, urging them to "vote with the dollar."

The Federal Trade Commission promised to investigate whether supermarket promotional games inflate food tags. All this gave the impression that food prices have climbed 4% in the past twelve months simply because the supermarkets are grossly profit hungry. The retailers do share some of the blame. But they constitute just one element in a complex mixture of ingredients—including Government policies and rising wages —that make up food cost.

Dwindling Surpluses. The major reason for the price rise is the startling decline in U.S. farm surpluses. Because of Government crop controls and the increasing size of foreign-aid shipments of food to famine-threatened nations, the wheat surplus has dropped since 1963 from 32.5 million to 15.2 million metric tons, is now below the minimum needed as insurance against domestic crop failure. In addition, bad weather reduced this year's harvest. Speaking at the Miami convention of the National Association of Food Chains last week, Boston Supermarket Executive Gordon F. Bloom said: "American consumers have grown accustomed to low food prices based on surpluses that are no longer with us. The honeymoon is over."

Grain shortages have increased the price of flour; consequently, bread prices have risen 7.5% since January. The steep price of feed grains for livestock has also contributed to an appreciable increase in meat prices. At the same time, ranchers have stepped up their slaughter of dairy cattle—to reduce feed expenses, take advantage of high meat prices—with the result that milk prices are up 7.9% this year.

Government policy is also a primary cause of the 10% rise in fruit and vegetable prices this year. Pressured by labor unions, the Government last January reduced the inflow of low-wage Mexican braceros who work in U.S. fields and orchards. Thus farmers had to hire domestic field hands, who demand higher wages and are reluctant to do such backbreaking "stoop labor."

Chain Reaction. The Government estimates that of every dollar spent for food, roughly 39¢ goes to the farmer, 40¢ to the wholesaler and distributor, and only 21¢ to the retailer. Supermarket executives point out that their industry's profit margin after taxes has scarcely changed since 1960, runs a modest 1.3% of sales. But that widely used, poor-mouthing figure does not sum up the whole situation. By the more incisive measure of profit on invested capital, supermarkets earn 11.5%, almost exactly as much as the average for all U.S. manufacturing.