As Food Prices Rise, School Nutrition Programs Feel the Pinch


As Food Prices Rise, School Nutrition Programs Feel the Pinch

February 14, 2008 -- Most people don’t need headlines to tell them that food prices are at record highs.  Take a look at the prices of fruits, vegetables, meat, and dairy products in your neighborhood grocery store.  They’re significantly higher than they were at this time last year.  Nightly news reports show that commodity items such as wheat and corn are closing in on unprecedented high prices.

At the end of January, the Economic Research Service (ERS) of the U.S. Department of Agriculture released a report showing the Consumer Price Index (CPI) for food is expected to rise approximately 3 to 4 percent in the next year.  In 2007, the CPI increased 4 percent, the biggest increase since 1990.  The CPI is one of the most reliable measurements for determining the cost of living – the average amount of money a person will spend to buy basic necessities such as food, clothing and housing. 

What’s driving the price of food up?  According to the report, there are many different reasons.  A major cause is that global grain supplies are very limited, forcing the price of items such as wheat and corn to reach historic highs.  In the United States, land that was once used to produce corn for food is now being used to cultivate food for ethanol.  With tighter supplies and less land, the price of corn is going up.

The increase of corn prices directly affects the cost of meat and dairy products.  A significant portion of the corn grown in the United States is used as feed for livestock.  As farmers pay more for feed, they pass the cost on to the consumer by raising the prices of meat and dairy.  Corn and wheat are both staple ingredients in many processed food products available in the grocery store.  As a result, these products are also increasing in price.

Rising fuel costs are also playing a role in the cost of food.  The price of oil hit records highs in January, with world oil prices just a few dollars shy of $100 a barrel. This caused energy costs, such as gasoline, to shoot up to a national average of over $3 a gallon, according to the U.S. Energy Information Administration.  Like global grain supplies, the global oil supply is also tightening as industrializing nations such as China and India consume more.

Record Food Prices and School Lunch
The record high food prices are not only affecting the average consumer waiting in line at the grocery store.  School nutrition programs are also feeling the pinch of rising food costs. 

School nutrition programs are expected to be financially self-sufficient.  The programs rely mostly on revenue from paid school meals and federal reimbursements, instead of funds from the general school district budget.  School districts need to provide quality, affordable meals, while balancing nutrition requirements, student preferences and financial obligations.

Rising energy and grain prices are compounding financial pressures school nutrition programs already face.  Increasingly communities are calling for more fresh fruits, vegetables, and whole grains for school meals.  These items are resulting in higher costs for school districts.

The rising cost of labor also contributes to increased costs for school programs.  On average, labor contributes to a significant portion of the expenses school nutrition programs incur.  Increasing salaries and wages for full-time and part-time employees and rising health insurance premiums are stressing the finances of many school nutrition programs.

As school nutrition programs continue to be challenged by the increasing costs of operating their programs, extra financial support is need to face these pressures.  Without additional funding from the federal, state, or local levels, school nutrition programs need to raise school lunch prices in order to operate in the black.

The School Nutrition Operations Report: The State of School Nutrition 2007 found that school lunch meal prices show consistent rates of increase over time. According to the Report, one-third of school districts increased full-paid lunch meal prices in the past school year, a small upswing from the number indicating a year-to-year meal charge increase in the 2005 Operations Report survey. Full-paid lunch meal prices increased a median of about 9%, or about five cents, and breakfast prices increased a median of about 15% in those districts that raised meal prices.

The Good News?
While prices in the immediate future continue to climb, history has shown that the markets will adjust and prices will stabilize.  According to ERS, the price of corn will continue to climb if corn remains the most efficient feed for livestock and ethanol remains a viable source of energy.  If alternatives to either of these are found, the price of corn will drop.  Additionally, if farmers increase production of corn, the price will also drop. Over time, food manufacturers and producers will also find ways of increasing efficiency or changing product formulas to limit the impact of high prices. 

In the meantime, however, school nutrition programs and consumers will continue to face challenges presented by the high prices. 

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