Sure, they are rioting for food in Haiti. Yes, the melting glaciers are threatening fresh water supply. But, did you know that the eternal Twinkie may soon be on the endangered list?
The Interstate Bakeries Corporation, based in Kansas City, Missouri, makes the Hostess products, including Wonder bread, Ho-Ho’s, Ding-Dongs, Twinkies, and Cupcakes. The company filed for bankruptcy in 2004 with the high price of flour cited as one of the reasons the company was struggling. The price of flour in 2004 was $4 a bushel. As the company tries to get itself back on track, flour prices have soared to as high as $12 a bushel. More after the fold.
From the Kansas City Star
It’s a situation that has chewed through the food chain like a rat in a grain bin, affecting a smorgasbord of food companies in the region, from vodka makers to pork processors. And while a portion of escalating prices is being passed on to consumers at the supermarket, the impact of astronomical commodity prices is being felt in other ways, including thousands of lost jobs and the remaking of some industries.
In January, Tyson cited grain costs when it closed most of a beef slaughterhouse in Emporia, Kan., eliminating 1,500 of 2,400 jobs. Feed costs also factored into the sale last month of Kansas City-based National Beef Packing LLC, the nation’s fourth-largest beef processor, for $560 million to Brazilian meatpacking giant JBS SA, which the next day bought the beef operations of Smithfield Foods.
According to the World Bank, global food prices are up 75% since 2000. Wheat is up 200%. Oil, as we know, has hit $105 a barrel. The high oil price not only increases the transport costs of food, it also makes crop fertilizers more expensive. And as the article points out, the high cost of wheat will affect cattle feed, which means meat and dairy products will go up. Other livestock will be affected similarly, raising the costs of pork, poultry and eggs. That takes care of at least 3 food groups. The World Bank has also declared (with the mother of all euphemistic phrases) "Severe localized food insecurity," (famine) in two African countries, and a threat of famine in 40 others. The World Bank has also noted a rising trend of "food insecurity" in urban areas, where there is food available, but people cannot afford to pay for it. It might be worthwhile to mention that the number of people in the U.S. applying for Food Stamps is projected to be 28 million this year, the highest number since the program was started in the 1969.
Other diarists here have discussed the different factors coming into play this year, including the falling dollar, increased demand world-wide, particularly from China, stock market speculation, and an all-around bad year for crops. Additionally, global warming, the use of crops for ethanol, and stupid trade policies all come together, along with the rising cost of fuel, to essentially triple the price of basic commodities.
The article, being in the Business section, is too polite to mention Global Warming, ("not in front of the M.B.A.’s, gracious!") but it does give a nod to the "weather:"
In early June last year, the Kansas wheat crop was estimated at over 500 million bushels. But extreme weather in some parts of the state, including heavy rains, reduced the crop to about 300 million bushels.
At the conclusion of the harvest, Kansas City Board of Trade chairman Frank Stone gave his grim assessment: "What began as the possibility of a record crop this year once again yielded to the forces of Mother Nature."
Yes, that wily old Mother Nature, up to her tricks. Kansas was hit with drought in many parts and flooding in others. The plains have cycled through drought periods throughout the last century, and farmers expect bad seasons. However, previous drought patterns usually lasted through two or three seasons before adjusting back to normal weather. The current drought has been going on, with greater and lesser severity, since 2000.
But back to what is important: Hostess snack cakes.
For now, according to the article, your Hostess cupcakes will still be on the shelves, albeit at a higher price. There are also, (what the article describes without a trace of irony) new high-end convenience gas-station-sugar-foods, which the company hopes will offset the losses:
Interstate has introduced some new higher-margin products like its Hostess 100 Calorie Pack Cup Cakes, a product where consumers pay for convenience and portion control, and IBC is rewarded with higher profits.
Ah, the helpless consumer, unable to control his own portions, and longing for a more convenient cupcake, pays more to have them made smaller and individually wrapped within a larger box. I find this 100 Calorie Pack Cup Cake idea so brilliantly absurd, and yet somehow so appropriate—almost a perfect metaphor for American over-consumption.
What to do about the current crisis?
Well, as we all know, the shelf-life of a Hostess snack-cake is quite long, due to the amount of preservatives packed in there with the creamy sugar fillings. Shrewd business woman that I am, I have begun stockpiling Twinkies, cupcakes, Ho-ho’s, and ding-dongs in my basement. I believe that when Hostess goes under, these items will become scarce luxuries, and I will be able to name my own price. In case of a long emergency, Hostess products can be used for barter and trade. Others have recommended stockpiles of alcohol and cigarettes, which can be used for trade when our dollars lose all of their value, but I believe a single package of Twinkies will have more value than a case of Bud Light and a pack of Camels.
And now, a poll.