Meat + Poultry - April 2005 - 8

Commentary

Paying (dearly) at the pump
I am generally tolerant of price increases. Postage stamps go up a few
cents each year and that's OK. My
barber just raised his price for haircuts
from $14 to $18, and I didn't flinch.
Cable TV rates in my area recently
went up and pushed my monthly bill to
more than $60 per month - no sweat.
Inflation happens.
But when I filled up my gas tank
today and the pump's $2.25 per gallon
price digitally stared me in the face, the
widespread impact of the most recent
price ascent began to soak in. Rather
than following my usual routine of
running inside the convenience store
to pick up a snack and a drink before
paying for my gas, I figured I'd cut my
losses, pay at the pump and get away
from there with a $32 tank of gas.
Who's got money for convenience food
after that kind of beating?
At print time, crude oil futures
traded for more than $58 per barrel,
and per-gallon gasoline prices reached
a record national average price of
$2.22. According to the U.S. Dept. of
Energy's Energy Information Administration, regular gasoline prices are
projected to average $2.28 per gallon
between now and September, 38 cents
above the level this past summer, According to the E.I.A.'s April "Short-

Term Energy Outlook," national
average prices are projected to peak
at about $2.35 per gallon next month.
And when the government makes this
type of "projection," I think it's safe to
say you can go all in on the likelihood
of it occurring.
The food industry has good reason
to pay attention to the record-high
prices at the pump. Besides gas prices
representing a significant drain on
profits because it costs more to receive
raw materials and to ship products,
consumers like me will compromise
their food purchases to offset what we
perceive to be a huge drain on our budgets. Consumers aren't likely to shudder that the price of food on menus
and in the meatcase might increase a
few cents here and there, but they are
more likely to compromise the quality
and quantity of their food purchases to
offset their gasoline expenditures.
John Tyson, chairman and C.E.O. of
Tyson Foods, Inc., Springdale, Ark., illustrated this point in an address at the
Reuters Food Summit this past month.
He warned that rising gasoline prices
could quietly show up in lower quickservice restaurant sales that normally
jump during the summer months. "If
you have to put in an extra $10 or $15
in the car, that is $10 or $15 you might

not spend at a fast-food restaurant on
the way home," he said.
Tyson is right. Consumers have
proven they will pay whatever it takes
to drive whatever they want, whenever
they want, for the most part. Despite
scorching prices, motor gasoline demand this summer is projected to average 9.3 million barrels per day, nearly
2 percent higher than last summer's
demand, according to the American Automobile Association, Heathrow, Fla.
If demand and price increase, something has to give. Unfortunately for food
companies, the extra money it costs to
drive often comes at their expense. This
"necessary evil," which is the price of
gasoline, somehow drains our budgets
for leisure activities, such as eating out.
I'm as guilty as the next guy in that I'll
compromise when or what I eat if it
seems like my wallet has been lightened
by other increases in costs of living.
And I pity the fool who suggests I give
up any of my cable TV programming.
By Joel Crews, Editor
jcrews@sosland.com

MEAT&POU LTRY
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April 2005

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Meat + Poultry - April 2005

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