Chicago, Apr. 25 - The move by some wholesale food outlets to restrict purchases of certain food staples caught the public's attention, but major supermarket chains aren't following suit, and food industry analysts say U.S. consumers shouldn't be worried about shortages.
Food prices have risen sharply this year, driven by increased global demand, drought and biofuel production. The March consumer price index reported food prices up 4.5% versus a year ago.
On Wednesday, Costco Wholesale Corp. indicated it had decided to limit bulk rice purchases in some stores. Likewise, Sam's Club, a division of Wal-Mart Stores Inc., said it was limiting customers to four bags at a time of some types of rice.
However, the purchasing restrictions on staples like rice are limited to wholesale outlets, as several retail grocery store chains said Friday they weren't taking similar action.
Publix Super Markets Inc. has no plans to limit purchases of rice or any other items, said Dwaine Stevens, spokesman for the Florida-based grocery chain. Stevens called the possibility that the company would ever have to consider limits "not very likely at all."
Likewise, Food Lion LLC stores are "not limiting sales whatsoever," said spokeswoman Karen Peterson.
The Salisbury, N.C.-based grocery chain, which is a subsidiary of the Delhaize Group, maintains continuous contact with suppliers and hasn't heard anything from them to indicate rice purchase limits are necessary, she said.
While limits were placed on rice purchases at Sam's Club stores, spokeswoman Ashley Hardie said Wal-Mart's retail stores were not affected.
Safeway Inc. and Kroger Co. were not immediately available for comment.
The Food Situation Is Not Dire - Industry
Ron Sterk, an editor at trade publication Milling and Baking News, said the food supply situation is not as dire as some have portrayed it. For instance, he rejected any comparison between the present situation and World War II.
"That's not a fair characterization," he said. "In World War II, there actually were food shortages."
That's not the case now, he said. Despite the actions of wholesale stores, there's no rice shortage "certainly not" in the U.S., Sterk said.
Sufficient supplies of other commodities such as wheat and rye are available, and prices for both are well off their peaks from earlier this year, he noted. For instance, Minneapolis Grain Exchange wheat prices hit $25 a bushel earlier this year, but forecasts for bigger crops this spring have pushed prices to around $11.20 a bushel.
"There's no doubt that wheat supplies are tight," Sterk said. "But no one's saying we're going to run out of wheat. It's just tight."
Bakers can also find the flour they need, "they just don't like paying what the price has shot up to," he said.
Tight Supply Doesn't Equal Shortage
There's no doubt grain supplies are tight. Wheat and rice supplies in the U.S and globally are at multi-decade lows and soybean supplies are also down sharply. Last year corn production was expanded to devote more acreage to ethanol production.
But it's not just biofuel usage that is lifting corn demand. Growing economies in China and India mean more sophisticated palates and demand for food there has grown. Livestock production continues to be the No. 1 user of corn in the U.S. Grain trade is dollar-based, and a weak dollar means greater buying power for foreign buyers, which has lifted U.S. agriculture exports.
Further, two years of bad weather in wheat-producing countries hammered output across the globe as demand rose. Poor rice harvests in Vietnam and other rice-producing countries combined with little advancement on acreage has limited global production.
Worldwide, demand for rice has outstripped demand for several years, said Bob Cummings, senior vice president of the USA Rice Federation, an industry group.
The U.S. rice industry is "confident there's enough rice in the U.S. to meet domestic demand as well the demand of our traditional export customers," Cummings said. But, he added, due to tight global supplies and higher production costs "it's fair to say that we don't see any slackening of cost pressure side." Cummings also said his group had not seen any across-the-board change in demand.
A significant factor in food costs is transportation. Crude oil prices are hovering just under $120 a barrel and the high energy costs reflected in manufacturing and transportation of packaged food items -- will sustain some level of inflation.
Consumers paid about $1.78 for a 20-ounce loaf of white bread in the first quarter of 2008, about 20% more than a year earlier, according to American Farm Bureau's market basket survey. During the same period, the farm-gate wheat cost reflected in that loaf's price increased to 7%, or 14 cents, from 4%, or 6 cents, a year earlier.
Consumers who are stocking up at wholesale outlets simply might be seeing a bargain.
"Most Americans have never really experienced absolute hunger; it's more likely a case of basic level arbitrage -- buy it while it's still cheap," said Michael Swanson, an agricultural economist at Wells Fargo. "Don't confuse disappearance (of supplies) with demand."