A great example of how "good intentions" go bad when it comes to government...

[6SpeedTA95]

LOUISVILLE, Ky. - Before the dinnertime rush, Larry Lewis was chewing over business strategy at the Fat Jimmy’s pizzeria he manages. The store had absorbed sharply rising cheese prices as long as possible.

It was time to hike the price on pizzas and pass along some of the expense that had been eating into profits the past few months.

“We don’t really have much choice,” said Lewis, who competes in a pizza-heavy city that’s the corporate home of large chains and features a large selection of pizza restaurants.

How big that price boost would be was still being tossed around. “It’s won’t be a huge increase, but there will be an increase,” Lewis said.

Like Lewis, pizza makers around the nation — from family run pizzerias to national delivery chains — are feeling the pinch from escalating costs for an essential ingredient in a hotly competitive, $30 billion-plus industry.

Block cheddar cheese reached $2.08 a pound Thursday on the Chicago Mercantile Exchange, up 78 percent from $1.17 a pound a year ago. At the end of 2006, the price was $1.33. Cheddar is the benchmark for mozzarella and other cheeses. Industry observers attribute the price surge to strong demand coupled with higher milk prices.

Some big pizza chains, which use mountains of cheese, already have responded.

Both Pizza Hut and Papa John’s International Inc. have raised the price of their cheese-only pizzas to the same amount as one-topping pizzas at company-owned stores.

The higher cheese prices have exacerbated pressure companies already face from higher wages and fuel costs, said Chris Sternberg, spokesman for Louisville-based Papa John’s.

Papa John’s uses about 100 million pounds of cheese each year, and the cheese typically makes up 35 percent to 40 percent of the food cost in making a pizza, he said.

And cheese-only pies cost the company more, requiring an extra cup of cheese, he said.

“So the customer is getting something of extra value for the price,” he said.

Pizza prices at Papa John’s restaurants vary by location. At a downtown Louisville store, customers were paying $12.58 for a large cheese pizza that used to be $10.99. Customers had the option of adding an ingredient, such as pepperoni, at no additional cost.


Papa John’s locked in cheese prices at a “reasonable level” through the third quarter, but cheese costs went up enough to prompt the higher price for a cheese pie, Sternberg said.

Dallas-based Pizza Hut, part of fast-food giant Yum Brands Inc., which is headquartered in Louisville, goes through 300 million pounds of cheese each year, spokesman Chris Fuller said. The chain’s cheese-only pizza has 50 percent more cheese than a one-topping pie.

At Domino’s Pizza Inc., spokeswoman Lynn Liddle said the Ann Arbor, Mich.-based delivery chain has seen plenty of ups and downs in the cheese market over the years. For the most part, she said, the chain has “managed to work around these peaks and valleys.” But if the price of cheese and other items continues to rise, Domino’s will have to boost its prices, she said.

Mom-and-pop shops are feeling the pressure, too. Constantly Pizza, a family-run chain of three shops based in Concord, N.H., has stood pat on pizza prices, but the escalating cost of cheese has changed some routines in the kitchen.

Veteran pizza makers used to casually eyeball the amounts of cheese heaped onto pizzas, but now everyone has to be more meticulous — tumbling cheese into measuring cups.

“We’re not cutting back our cheese. We’re just making sure that our employees are being very accurate,” said owner Dave Constant.

His shops, which use up to 2,000 pounds of cheese a week, have seen cheese prices go up 45 cents a pound during the past two weeks. “That bites right into the profit margin,” he said.

As a small operator, Constant said he doesn’t have the luxury of big chains to lock in prices months in advance.

The higher cheese costs are the result of an economic chain reaction, observers say.

Prices for milk, a key ingredient in cheese, have gone up — a result of higher feed grain costs for dairy cattle herds, said Rob Hainer, spokesman for the Atlanta-based Southeast United Dairy Industry Association. In particular, corn prices have risen amid growing demand for ethanol fuel, he said. Also fueling higher cheese costs has been strong U.S. and global demand for dairy products, he said.

Experts see no immediate relief in sight for pizza makers.

A market analyst with Downes-O’Neill, a dairy brokerage firm in Chicago, said continued strong demand, along with a typical summer decline in milk production, could keep cheese prices high for a while.

“There’s some definite room to the upside,” said analyst David Zaslavsky, projecting that block cheddar cheese prices could reach $2.15 to $2.20 a pound in late summer.

He said cheese prices could level off or retreat slightly in the fourth quarter.

Until there’s a price downturn, workers at Constantly Pizza will carefully dole out cheese, and the business will “just strap down and be tough,” Constant said.

But he has found a silver lining. At least costs for flour and tomato sauce have been stable, he said.

And if prices for a couple of core products rose sharply at the same time?

“That would be a wrecking ball,” Constant said.

Pizza makers hit with higher cheese costs - Food Inc. - MSNBC.com


This is another great example of how government internvention while well intentioned fouls up the free market. The demand for ethanol was already beginning a fairly slow but steady increase as energy prices and technology pushed its natural demand and equilibrium price higher. However, government has decided to offer huge incentives for ethonal production crimping the availabile of corn for use in other areas of our economy. While rising corn prices are good for corn producers, the spillover effects are being felt by everyone in rising costs throughout the grocery store and restuarant business.

The impact has been quite sobering even for people like myself that were at first onboard with the production of ethonal even if the government helped "guide the market". I've read about half a dozen articles on this and am beginning to change my tune. Especially considering the impact of ethanol now and in the future will never be an all out supplement for oil it will simply be a minor substitute at best.

I think we would have been better off to offer deeper subsidies in wind/water/natural gas/nuclear power generation. Then begin to pull oil burning power plants offline. The latter would have far less impact on our overall economic well being than messing around in the agriculture business.

[Donkey®]

I don't get it. Where has the government done anything to CAUSE this? There are MANY factors that have made the cost of the cheese rise. Take away the portion the government is being blamed for? Would it change anything? Doubtful.

[Diesel66]

Originally Posted by Donkey®

I don't get it. Where has the government done anything to CAUSE this?

govt partially controls the price of milk.

[6SpeedTA95]

Originally Posted by Donkey®

I don't get it. Where has the government done anything to CAUSE this? There are MANY factors that have made the cost of the cheese rise. Take away the portion the government is being blamed for? Would it change anything? Doubtful.

I told you how government has exacerbated this problem. By creating huge incentives for ethanol production it has artifically pushed up demand for ethanol before the market is ready resulting in a corn shortage.

[AVengeance]

If you want to bitch about ethanol, lets talk about the trade tarrifs on imported sugar and how cheap HFCS is. The government is subsidizing making children across America obese. There is no corn shortage, or the price of a coke would go up.

[Ardentfrost]

Oh snap, I said this shit when they first started promoting Ethanol. I didn't extrapolate it to cheese, but I said that the ethanol shit was going to cause corn prices to rise unrealistically, and a lot of corn is used as feed for animals, thus meat prices will increase. I didn't think about cheese because of the increased price in milk.

It sucks it's happening, but like everyone else, I like to see that I'm right.

[Publius]

I actually heard about this last year sometime I think, but it was related to the transport costs rising with gasoline prices. It seems that they're screwed either way, which leads me to believe that the price has been held artificially low via government subsidies for a while now.

[hsmith]

Originally Posted by Donkey®

I don't get it. Where has the government done anything to CAUSE this? There are MANY factors that have made the cost of the cheese rise. Take away the portion the government is being blamed for? Would it change anything? Doubtful.

hmm lets see. mandating that highly inefficient corn ethanol be used in gas as a subsidy to corn farmers

disallowing sugar cane to be imported by instituting high tariffs, where sugar cane is a highly efficient source of ethanol, as another subsidy to sugar farmers

basically fucking the American public for a slim minority of farmers

[6SpeedTA95]

Originally Posted by Publius

I actually heard about this last year sometime I think, but it was related to the transport costs rising with gasoline prices. It seems that they're screwed either way, which leads me to believe that the price has been held artificially low via government subsidies for a while now.

Oh yeah, government subsidies have been causing issues in the ag business for a long time. I wish Dos would chime in here, dos and myself are both in fairly large ag/cattle states.

Problem is now government subsidies for Ethanol are having the opposite effect. People expect farmers to ramp up corn production overnight and it does not work that way. It takes a year at least if not two or three to get other fields to the point that you can produce with them.

So we have a higher than realsitic demand for ethanol brought about by deep deep government subsidies which is now spilling over into overall food costs.

[6SpeedTA95]

Originally Posted by AVengeance

If you want to bitch about ethanol, lets talk about the trade tarrifs on imported sugar and how cheap HFCS is. The government is subsidizing making children across America obese. There is no corn shortage, or the price of a coke would go up.

There is an economic shortage of corn. Quantity demanded is higher than supply which is why we've seen the drastic price increase. Quantity supplied is now higher which should translate into more supply over the next two or so years.

I agree the tarrifs on sugar cane is ridiculous but I'm a big free trade guy.

[Ardentfrost]

Originally Posted by hsmith

sugar cane to be imported by instituting high tariffs, where sugar cane is a highly efficient source of ethanol, as another subsidy to sugar farmers

Plus we're one of the largest sugar producers in the world... you'd think we'd favor that, but corn industry put more money into lobbying.

[DosEquis]

I have been one of those who felt corn ethanol was not a viable long term solution to our energy problems. There are to many things that go in to it that big city coastal folks and politicians don't realize. The main problems include corn being extremely demanding on soil for nutrients, the net amount of alcohol you can produce from a corn crop, and as the thread points out the higher prices of other goods like beef, cheese, milk, and most importantly some types of beer and whiskey.

Brazil pulled it off with sugar ethonal, but they also started on it back in the 1970s. It took them 30 years, and they also had to clear cut millions of acres of amazon forest to make room for sugar and other crops.

The subsidies for farmers is an issue that always comes up in nebraska, iowa, and kansas. These conservative republican farmers want nothing to do with the government, except their welfare check when crops come up short. As far as subsidies it just comes back to which representative can bring home federal money to his district. He gets farmers some "aid" and he gets elected. They do it to try to keep the cost of food down and to try to keep the family farms from being "wal-marted" by the corporate farms.

Ultimately I think our fuel solution will be electric or hydrogen. They just approved 18.4 million dollars for research regarding hydrogen fuel cells. We also need drastically improved battery, solar panel technology, and electric engine efficiency.

[6SpeedTA95]

Originally Posted by DosEquis

I have been one of those who felt corn ethanol was not a viable long term solution to our energy problems. There are to many things that go in to it that big city coastal folks and politicians don't realize. The main problems include corn being extremely demanding on soil for nutrients, the net amount of alcohol you can produce from a corn crop, and as the thread points out the higher prices of other goods like beef, cheese, milk, and most importantly some types of beer and whiskey.

Brazil pulled it off with sugar ethonal, but they also started on it back in the 1970s. It took them 30 years, and they also had to clear cut millions of acres of amazon forest to make room for sugar and other crops.

The subsidies for farmers is an issue that always comes up in nebraska, iowa, and kansas. These conservative republican farmers want nothing to do with the government, except their welfare check when crops come up short. As far as subsidies it just comes back to which representative can bring home federal money to his district. He gets farmers some "aid" and he gets elected. They do it to try to keep the cost of food down and to try to keep the family farms from being "wal-marted" by the corporate farms.

Ultimately I think our fuel solution will be electric or hydrogen. They just approved 18.4 million dollars for research regarding hydrogen fuel cells. We also need drastically improved battery, solar panel technology, and electric engine efficiency.

Well said!

[thomez]

Originally Posted by hsmith

hmm lets see. mandating that highly inefficient corn ethanol be used in gas as a subsidy to corn farmers

disallowing sugar cane to be imported by instituting high tariffs, where sugar cane is a highly efficient source of ethanol, as another subsidy to sugar farmers

basically fucking the American public for a slim minority of farmers

engines can run on ethanol very efficiently, but they have to be designed to only run on ethanol or a certain blend thereof ... if you design them to run on 87 octane then run them with E85... yes they are inefficient...

the next logical step, if we plan to continue to pursue ethanol like it is god's gift to our oil problem (which I'm sure you would know, I hope we don't) would be to design cars to run on only ethanol... higher compression engines that will make use of the octane rather than run worse...

[kinggovernor]

Originally Posted by DosEquis

I have been one of those who felt corn ethanol was not a viable long term solution to our energy problems. There are to many things that go in to it that big city coastal folks and politicians don't realize. The main problems include corn being extremely demanding on soil for nutrients, the net amount of alcohol you can produce from a corn crop, and as the thread points out the higher prices of other goods like beef, cheese, milk, and most importantly some types of beer and whiskey.

Brazil pulled it off with sugar ethonal, but they also started on it back in the 1970s. It took them 30 years, and they also had to clear cut millions of acres of amazon forest to make room for sugar and other crops.

The subsidies for farmers is an issue that always comes up in nebraska, iowa, and kansas. These conservative republican farmers want nothing to do with the government, except their welfare check when crops come up short. As far as subsidies it just comes back to which representative can bring home federal money to his district. He gets farmers some "aid" and he gets elected. They do it to try to keep the cost of food down and to try to keep the family farms from being "wal-marted" by the corporate farms.

Ultimately I think our fuel solution will be electric or hydrogen. They just approved 18.4 million dollars for research regarding hydrogen fuel cells. We also need drastically improved battery, solar panel technology, and electric engine efficiency.

[AVengeance]

Originally Posted by 6SpeedTA95

There is an economic shortage of corn. Quantity demanded is higher than supply which is why we've seen the drastic price increase. Quantity supplied is now higher which should translate into more supply over the next two or so years.

I agree the tarrifs on sugar cane is ridiculous but I'm a big free trade guy.

If that's true, why is soda pop still so cheap? And all the other garbage with HFCS in it? The problem is that ethanol is a very real threat to OPEC, and they're not going to rest until everyone cringes at the very mention of ethanol or E85. They expect you all to be short-sighted idiots, and completely ignore the fact that corn is used for a lot more than making grain alcohol. It looks like it's working. You're all "oh no, corn shortage, pushing ethanol is making cheese more expensive" while almost completely ignoring how cheap other corn products still are.

[RMNIXON]

All I know is I am paying more for Cheeze so the Government can produce more GAS!

[Ardentfrost]

Originally Posted by AVengeance

If that's true, why is soda pop still so cheap? And all the other garbage with HFCS in it? The problem is that ethanol is a very real threat to OPEC, and they're not going to rest until everyone cringes at the very mention of ethanol or E85. They expect you all to be short-sighted idiots, and completely ignore the fact that corn is used for a lot more than making grain alcohol. It looks like it's working. You're all "oh no, corn shortage, pushing ethanol is making cheese more expensive" while almost completely ignoring how cheap other corn products still are.

Soda is cheap? A couple years ago it was $3 for a 12 pack, now it's over $4 except if it's on sale, and even then it's usually 3/$10, which is more than it used to be not on sale. It used to go on sale for between $2 and $2.50.

The only reason I remember that is because a couple years ago I was a poor-as-shit college student and would get soda for less than a quarter a piece when on sale, then eat a $0.60 Kroger pizza and that's all I would eat in a day. I was like one of those Sally Struthers kids where for less than a $1 a day, you can make a difference.