Return to traditional values or an even slipperier slope?

Economic crisis has major implications for diet, health and other food issues.

Martin Shuker, KFC’s chief executive, says that the chain’s cheap prices are helping win custom. “We do offer good value, so you can buy a bargain bucket and feed a family of four for a tenner, [which is] definitely appealing in these difficult economic times,” he said. Does anybody else find this SCARY?

I seem to remember having myself predicted some sort of return to austerity, or more "traditional values" this year in response to economic decline and falling consumer confidence, it seems however, that in the UK for example while people are turning their backs on the fashionable restaurants, gourmet, ethical and health foods that boomed as incomes peaked, far from cooking up cheap healthy veg at home they are filling up on buckets of fried chicken, takeaway pizza, supermarket value brands and stuffing themselves with comfort foods as the recession deepens.

The high street landscape is already begging to change as the likes of Domino's, Subway, Aldi and Lidle implement expansion plans in response to the strong growth they are enjoying in the current climate. This is not the change we needed!

It strikes me that there are various fundamental issues/questions here, two major points for analysis and action standing out:

1. The premiumisation of "health" and "ethical" - the use of health and ethical categories to boost profits worked while incomes were rising but this is now unravelling in response to weakening consumer making the question of whether it is appropriate to be paying a premium on health more prescient than ever.

2. Poor consumer choices - why do consumers choose unhealthy foods over cheaper healthier ones? Why do consumers choose expensive health foods when they are buying more branding than health benefits.

The Era of Cheap Food is Still Over Too!

Last year and up until recent unprecedented hikes in agricultural commodity price started easing, it was the "structural price rises" in food commodities that were at the top of everyone's minds and the agenda, I blogged here about the "structural shift in agricultural commodity prices" and food as "the new oil"and about how high prices, price volatility and lack of market availability was driving the growth of a new trend towards bilateral agreements bypassing international markets in order to secure directly stable prices and supply.


While global commodity prices have gone into overall decline (despite notable exceptions like cocoa etc.), the impact of the current financial and economic crisis on agricultural markets may mean that we cannot expect any return to business as normal, with major implications for agricultural markets and consequently trade, food security and politics. The drying up of trade finance resulting from financial and economic crisis is increasingly damaging the ability of markets to function efficiently, helping to perpetuate the bilateral food trades and deals that had grown increasingly more popular in response to rising prices and increased volatility over recent years since a whole list of countries increasingly are turning to barter where trade finance is hard to obtain.

For those moreover, who presume recent price hikes were a bubble now pricked with a deflationary pin and whom are anticipating a return to mean, there is in fact perhaps little cause to suppose that the current easing in agricultural markets is anything structural at all. Despite the deflationary pressures of the current environment, the underlying upward pressure on global food prices generally is likely to be maintained, particularly as the need to incorporate the true cost of resources into our food supply becomes increasingly pressing. Certainly we should be prepared for food price issues to return with a vengeance when the economy starts to recover, as no doubt will oil prices (see "The Era of Cheap Oil is Still Over") - with supply constraints only exaggerated further by the unravelling of production and investment resulting from the current economic downturn.

As a side note, it is interesting also to note the impact of currency market volatility on food prices, with current weakness of the sterling here in the UK for example, not only cancelling out declines in dollar denominated commodity items, but also pushing up the cost of local products since UK farmers enjoy increased pricing power domestically thanks to their ability to sell to Europe at a higher return on account of sterling weakness. This sort of general volatility is increasingly pushing food up the agenda and resulting in a rash of protectionist think tank papers etc. I attended a talk hosted by the UK's Fabian Society and given by UK Secretary of State for Environment, Food and Rural Affairs Hilary Benn on the topic of food at the end of December, the first speech made on food by a cabinet minister in the UK for many decades, and it is not only the UK that food is receiving attention.

The questions posed by these and other trends are massive and highly significant. Questions concerning the location, means, ownership, control, distribution etc. of supply and more. These are questions that need addressing and which I hope to start exploring here.

The Era of Cheap Oil is Still Over

Today's low oil prices the anomaly..
If you are breathing a sigh of relief thinking that the free fall oil prices went into late 2008 and cheaper petrol at the pump are a return to the proper order of things and the end of a painful speculative bubble, don't be deluded, the era of cheap oil is still over: today's low oil prices are more likely only masking temporarily a looming crisis and recent high energy prices may be expected to return with a vengeance.

Unwinding of demand in response to downturn accelerating this trend...
Indeed, if oil supply was not keeping up with demand driving prices up last year, the current collapse in oil prices is only accelerating this trend. As oil producers slash production to try and prop up prices and new and non-traditional (deep sea; oil-sands etc.)projects are scrapped as plummeting oil prices mean they are no longer profitable etc. we are seeing a scaling down of production not unlike the coiling of a spring. The big question is, will supply not be even more out of sync with demand when the global economy starts to recover?

Investment in the alternatives we will need also suffering...
The concerning thing is that it is not just traditional oil, gas and other fossil supply that which is suffering as investment dries up, alternative technologies which are more important now than ever, are also seeing investment dry up as low oil energy prices make technologies that were competitive with oil when oil prices were high, left high and dry now that prices have fallen so much. Only Monday it was reported that "The economics of the world’s biggest offshore wind-farm project are “on a knife-edge”, ...its viability called into question by the falling prices of oil, gas and carbon dioxide emissions permits."

Current global trends unsustainable says IEA.
At the current rate of decline, said the IEA 2008 oil outlook report, oil production from existing fields will fall to just 30 million barrels a day by 2030 – or roughly 73 million barrels short of the expected level of demand. The chances of finding the necessary new demand from somewhere to fill this gap is - besides being horribly undesirable - also highly implausible. The reports executive summary starts "Current global trends in energy supply and consumption are patently unsustainable." And concludes with a similarly potent call to arms: "Time is running out and the time to act is now."

Without drastic measures the market will only force feed us more cruelly the medicine we are rejecting...As this report highlights the era of cheap oil is over and unless drastic measures are taken to reduce energy consumption and speed up the development of new energy sources, the world could be headed for a serious energy crisis as soon as 2015. If this happens, and without wanting to sound melodramatic, our current economic woes will be entirely overshadowed by this crisis. It is important that investment in new and alternative energy is sustained and expanded to ensure we are as prepared as we can be against the comming supply shock.