Tuesday, July 22, 2008

Cereal cost

Food prices have been rising lately, and cereal has been no exception. Obviously, the high cost of fuel has certainly been a major factor. Some also blame the increased production of ethanol from corn which is driving up food prices.

A chart produced by the Toronto Star provides an interesting look into what costs go into a box of cereal. Most significant is that the actual cost of the grains comprise only 2% of the cost, and transportation accounts for 4.5% (but that could be rising). If these numbers are close to being accurate, it corrects some misconceptions we might have as to why cereal prices are really rising. Which prompts one to ask: Are the cereal companies completely honest when they communicate the reasons for higher prices and shrinking boxes? It's too easy to blame fuel prices, etc.

It also shows: Processed foods have little to do with the actual ingredients.

Worth thinking about.

(See larger version of chart here)

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Leslie said...

Wow, thanks for passing this along.

I wonder if some of the indirect costs are also being driven up by rising fuel prices? Even so, that shouldn't be enough to account for how much more expensive cereal has been getting.

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