House Committee on Small Business: Rising Food Prices Hit Small Firms Hard

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Congress hears from farmers, entrepreneurs and ethanol producers

There may not be a simple answer to the rising cost of food prices, but that doesn’t mean we shouldn’t work towards short- and long-term solutions to this problem

Consumers across America are feeling the strain of rising food prices, but they are not alone. Small businesses—from family farmers to restaurants and grocery stores—are seeing the cost of their “raw materials” increase rapidly. The current economic downturn only compounds the problem, leaving consumers with less disposable income for the products and services these firms bring to market.

Today, the House Committee on Small Business examined how the trends are affecting the nation’s economic food chain. Committee Members heard from a panel of entrepreneurs, and called for a national dialogue to yield sound policy and a full understanding of variables driving prices for such items as bread, eggs and milk.

“Like other Americans, entrepreneurs are facing record oil prices, tightening credit markets, and a lagging economy. They are also dealing with skyrocketing food prices—both as consumers and as business people,” said Chairwoman Nydia M. Velázquez.

Small firms feel the impact of sudden increases in business expenses more harshly than their larger counterparts. At today’s hearing, the American Bakers Association noted a bag of bread flour cost $17 in 2006. That same bag now costs a small business $52. For many entrepreneurs, such radical jumps in costs can mean the difference between turning a profit and being forced to shut their doors.

“The situation presents serious challenges, so we shouldn’t waste time despairing or pointing fingers. Instead, we should focus on understanding the dynamics of the problem and the how the pieces of this puzzle come together,” said Chairwoman Velázquez.

Witnesses noted that forces such as changing weather patterns, increased global demand for food items in emerging markets, and record oil prices have joined to create a “perfect storm”. Their testimony also underscored that no single variable could have caused the current situation on its own, and that any solution must take the complex interaction of factors into account.

“There may not be a simple answer to the rising cost of food prices, but that doesn’t mean we shouldn’t work towards short- and long-term solutions to this problem,” said Chairwoman Velázquez. She also noted that small firms are the core of the nation’s fiscal strength, and added: “Current conditions may be pushing them to the limit, but I remain confident in the resiliency of U.S. small business. Entrepreneurs have always led the way back to economic recovery, and—with our support—they’ll do so again.”

Click here to view witness testimony.
Click here to view video of the hearing.

Erin Donar/Jaime Zapata
(202) 226-3636


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