Fuel Costs Eating Up Food Banks

March 1, 2008       Mark Hrywna      

The highest inflation rate in 17 years means higher prices for everyone, but food banks across the country in particular are facing tough choices as a result of skyrocketing costs coupled with rising demand for service.

Consumer prices rose 4.1 percent in 2007, according to data released in January by the U.S. Department of Labor, but food prices specifically were up almost 5 percent — including 36 percent for eggs and 29 percent for whole milk. The federal data only put into black and white what some food banks have already seen coming.

The San Diego Food Bank had a staff of about 33 employees, which has been reduced to 20 during the past year, said Executive Director Jim Jackson. The food bank also has tried to contract out some of its publicity work while staff reductions mean longer lines for people waiting to get food or recertification for eligibility.

"We’re as lean as we can get," said Jackson, whose food bank has an annual budget of about $6.5 million. "We’ve done all the internal cuts that we can, we’ve improved our operations significantly. Now we’ve really got to find sources of income," he said, whether that’s private grants, corporations or individuals. "We’re scrambling."

One of the most important ingredients to food distribution is fuel, Jackson said. "That’s been driving the cost of food more than anything else. That’s not something you can turn around and say. ‘We need someone to pay for that;’ people just assume."

The past six months, Jackson said, there’s no question the biggest cost has been fuel, with the average price per gallon about $3.25, some 70 cents more than last year at the same time. That adds up with the food bank’s five trucks taking food to various distribution centers. Even the price of boxes the food is shipped in has increased, he said; no small price when 7,000 boxes are distributed monthly. "That’s a lot of cardboard," he said, adding that about 10 million pounds of food are distributed annually, approximately 5 percent of which is purchased.

"One of the most important things that’s happened to us — not necessarily the price of food, that’s been going up gradually — but the big spike happened for us with the price of fuel," said Jackson. "What we found is that for a case of vegetables that used to cost $6 six months ago, today costs $8, and it’s entirely due to fuel."

While food banks often receive donations of food, it’s not uncommon for them to purchase food to complement inventories. And in the past decade, traditional food donations have dropped considerably for a number of reasons.

The Community FoodBank of New Jersey based in Hillside, N.J. has seen the proportion of its inventory supplied by the federal government decline for many years, said Meara Nigro, director of communications.

Last year, commodities from the United States Department of Agriculture (USDA) made up 16 percent of the New Jersey food bank’s inventory, down from 27 percent in 1997. The USDA’s emergency assistance food program has allowed food banks to purchase surplus agriculture products since the 1980s. In recent years, however, there has been a smaller surplus as U.S. farmers are able to sell more product to emerging markets, like China and India, leaving less for the federal government to purchase.

About half of the food bank’s inventory comes from local food industry donations and those received through its affiliation with America’s Second Harvest (A2H), headquartered in Chicago. The New Jersey food bank is among the affiliates that spend the most to purchase and/or process food; one of about 26 nationally that spends at least $1 million annually.

A state food purchase program that provided $4 million for hunger relief "has been a godsend," Nigro said. The Community FoodBank’s share of that pot is about $2.5 million since it’s the Garden State’s largest facility, and she’s optimistic that Gov. Jon Corzine will continue the commitment in the next state budget. About 15 percent of the inventory comes from items purchased through the state program, used strictly to buy nutritious foods.

In recent years, the Community FoodBank has received 5.6 million pounds (2002) and 4.4 million pounds (2003) from the USDA program, Nigro said. "It’s a trend that has been experienced all over the country; it’s not just us seeing it," she said.

The Second Harvest Food Bank of Southeastern Ohio, serving 10 rural, Appalachian counties, has seen it firsthand, too. The Logan, Ohio-based food bank’s distribution has dropped by a third in recent years, from 12 million pounds in 2005 to 8 million in 2007.

"We’re really suffering quite extensively just because of the fall off in food donations," said Dick Stevens, executive director. "We’re struggling right now. Demand is through the roof and resources are almost down to nothing," he said, attributing the drop in distribution mainly to commodities from the federal government drying up altogether.

Like U.S. farmers, the food industry also has been selling more product to overseas markets, and becoming more efficient with smaller profit margins, so food banks are seeing fewer donations from that source as well.

Part of adjusting to the changing climate could mean hunting around for the best bargains, translating into more travel, and thus, more trucking and fuel costs. "We might have to travel further to get it, or we might have to agree to take an entire trailer load," Nigro said, "which sometimes is more than we need, but then at least we can guarantee a good supply of a particular product while at a lower price."

Despite all the pressures, Community FoodBank distributed a record 23 million pounds of food and groceries last year.

Usage and demand at the Second Harvest Food Bank of Middle Tennessee’s emergency food box program has experienced a 9-percent spike during the past year, said Jaynee Day, president and CEO. As one of two food banks in the state, the Nashville-based facility serves 46 counties in west and central Tennessee.

"What we’re seeing in our outlying counties is many programs are having to close because they don’t have the financing available to either go out and purchase the food themselves or be able to maintain the program. It’s just becoming too costly for them — whether it’s a small social service agency or church group," Day said. Large plant closings in the area have put a huge burden on pantry programs.

The food bank has an annual operating budget of about $7 million, with another $12 million as part of the cooperative purchasing program, which started five years ago and now has about 155 food banks participating all over the country. Most food banks don’t have purchase programs for themselves and for other food banks, Day said, but just for themselves.

Due to a drop in food donations, particularly of items that food banks need on a daily basis, the Tennessee food bank began the purchasing program that has grown from buying several hundred thousand pounds of food locally to 14 million last year, both locally and nationally. "It’s grown…because the need within the network has grown for that consistent supply of protein items and other shelf-stable items that we maybe used to get donated, but just are not getting as many donated, either locally or nationally," Day said.

"We’re challenged to say the least," said Tony Josephs, director of purchasing at Food For the Poor in Coconut Creek, Fla.

Food For the Poor purchases things like rice, beans, canned goods, corn meal and milk. Josephs estimated that between 45 and 55 percent of purchased items last year were food products, and those prices depended on availability. For instance, Food For the Poor was not able to meet projections for its January deliveries because of the lack of rice. "We were able to do it for canned goods but not rice. Rice is where we’re having the biggest problem really," Josephs said.

Food For the Poor gets rice from wherever it can be found cheapest, whether that’s the U.S., Brazil, Nicaragua or Guyana. "It depends on pricing from each country," Josephs said. "At some times one country’s price might be better because it depends on crop size. It moves around, it’s not necessarily constant. Cheaper rice out of Guyana today might not be cheaper tomorrow," he said. "We’re constantly shopping for the best price."

Josephs is hopeful that crops will start coming in from other countries, increasing availability and bringing prices down. "We really started to see it (spike) when oil hit $100 a barrel. Our shipping costs also began increasing," he said, with surcharges on fuel and other items. "A lot depends on the dollar and gas prices for 2008, those two things are so unpredictable right now. It doesn’t look very good but we hope it stabilizes." The movement of gas and oil prices and the U.S. dollar being down, Josephs said, makes for not a "very palatable combination."

One of the challenges for food banks across country is to "be able to maximize their opportunities that they have locally within their communities," Day said. "But our biggest challenge is if food and gas rises go up, our job is going to get a whole lot tougher." NPT