Food Protection Trends - October 2009 - 673

Ivan parkin lecture Navigating Food Safety through Times of Economic Chaos: A Call to Action Dr. Paul A. Hall AIV Microbiology and Food Safety Consultants, LLC Hawthorn Woods, Illinois T “How paramount the future is to the present when one is surrounded by children” – Charles Darwin (1809 – 1882) he current chaos in global markets has had a ripple effect across all segments of the economy including the food sector. Government statistics show that the average US Producer Price Indices for all commodities were significantly down in 2008 compared to the year before. US net farm income is projected to be significantly down in 2009 compared to 2008 and overall food sales in the US were down 6.0% for food consumed at home and down 4.5% for food consumed away from home compared to 2007. Overall, US economic growth is shrinking in 2009 due to weak housing construction, higher long-term market interest rates, deteriorating household and business balance sheets, rising unemployment and falling personal income all translating into falling consumer spending. According to the US Census Bureau, US retail and foodservice sales for May 2009 were 9.6% below May 2008 with all retail trade sales off 10.8% from a year ago. US consumers are spending a smaller percentage of their income on food. Food expenditures as a share of disposable income was 9.6% in 2008 compared to 11% in 1988 (USDA–ERS). From a global perspective, the strong growth in total world trade over the past 5 years is declining as world economic growth is projected to drop to 1.2 – 1.5%, well below the 2% growth rate seen as the standard for a world recession. Agricultural imports into the US has average >10% annual growth over the past 5 years, however, for 2009 agricultural imports will climb only about 2.1% (USDA–ERS). Increased competition in global grain markets, much lower prices for grains, oilseeds, and cotton and weaker demand combined with a stronger dollar have reduced US export values. The USDA estimates that US exports will decline over $13.5 billion in 2009 (14.4% decline) (USDA–ERS). Global food prices have risen over 80% since 2005 (wheat +141% and rice +130%) and are projected to continue to rise in the future. As a result of the global economic downturn, the Industrial Research Institute (IRI) anticipates flat Research and Development spending in 2009. There is clear trend in all segments to shift R&D away from support of existing products to developing new products. Some good news from the food industry perspective is that directed basic research is expected to decline in all segments except for food and tobacco. While the food industry, historically, has not been a leading investor in R&D spending (expressed as a percentage of sales), at least, in 2009 spending is not projected to decline. Capital spending is projected in the food industry to be down 2.9% (www.foodprocessing.com). Seven of the top 20 companies in Food Processing Magazine’s 2009 survey are cutting capital investment by more than 28%. Job losses are widespread across the major industry sectors including the food industry with large declines occurring in manufacturing, professional and business services, and construction. In June 2009, the overall US unemployment rate was at 9.5% with 14.7% unemployed individuals. While layoffs are continuing in the US food manufacturing sector, it has not been hit as hard as other sectors (US Department of Labor). Food manufacturing employment was down only 0.68% in June, 2009 compared to a year ago versus job losses of 12.2% for total manufacturing and 13.7% for construction. Given the chaotic economic climate around the globe, not all is bad. The great 13th Century Persian poet Sa’di said that “When fortune closes one door, it opens another” (The Maxims of Sa’di). In the context of the food industry this is exemplified by the explosion in sales of private label products (store brands). Consumers hit by job losses, shrinking retirement investments, and the daily depressing economic news are modifying their shopping habits in two major ways: (1) consumers are shopping at stores they perceive as low price retail leaders (e.g., Walmart, Costco and other clubstores, and Aldi’s) and (2) budget conscious shoppers are increasing their purchases of private label brands. A June 2009 survey conducted by the Private Label Manufacturer’s Association shows that the market share gains posted for private label products during the recession will hold up after the economy recovers. While private label growth has slowed in recent months, year-ago share gains continue to hold steady. In addition to the economic and its impact on the food industry there are number of other factors that impact food safety: • Globalization of our food supply • Intensive animal husbandry and agricultural practices • Centralized food processing and manufacturing OCTOBER 2009 | FOOD PROTECTION TRENDS

http://www.foodprocessing.com

Food Protection Trends - October 2009

Table of Contents for the Digital Edition of Food Protection Trends - October 2009