As President Obama defends the effect of the stimulus on the economy, there seems to be a growing sense that the economic recovery is not exactly in the express lane. Here is some coverage from Bloomberg about the state of the recovery:

From the story:

The worst recession in half a century may be prolonged because consumers see few signs job losses and declines in home prices are ending, economists Nouriel Roubini and Robert Shiller said.

“The fundamental problem, as Franklin Delano Roosevelt said in 1933, is fear,” Shiller, a Yale University professor, said yesterday on Bloomberg Radio’s “Surveillance.” The Great Depression was deepened by a “sense of lost confidence or animal spirits that was a self-fulfilling prophecy. The worry is that we will have the same kind of issue arising again,” he said.

TK:  Yet, one of the better stories relating to the effect of the stimulus relates is how the increase in food stamp allocations have boosted food purchases. The Motley Fool writes here that “one aspect of the stimulus is working well.”

From that post:

Today the Wall Street Journal has a nice article on the benefits being seen in the food stamp program expansion.  In Iowa, small farmers at local farmer's markets are seeing increased support as more people bring in their food stamps and buy locally grown food.  The increase in food stamps has increased some struggling family food budgets by about $80 more a month.  The result has been families eating better food (vegetables, fruit) that they wouldn't be able to afford before, and the local economies seeing increases in spending through farmer's markets, and grocery stores.

 That's the nice thing about increasing food stamp benefits - it can quickly go into the economy as stimulus, the spending from individuals has to be local, resulting in indirect economic benefits for the towns and surrounding communities.  Its a much better stimulus than a tax rebate - which more often than not goes to pay down debt, or buy a new TV.

TK: So Obama can be praised for insisting that at least part of the stimulus plan be focused on spending that is felt immediately in the economy.  By the way, the WSJ story is found at this link From the story:

The president's stimulus plan has been aimed primarily at the top of the economy, pumping money into banks and car companies and state and city governments. But it also has put more money into the hands of the poorest Americans by boosting monthly food-stamp allocations. Starting in April, a family of four on food stamps received an average of $80 extra.

Money from the program -- officially known as the Supplemental Nutrition Assistance Program -- percolates quickly through the economy. The U.S. Department of Agriculture calculates that for every $5 of food-stamp spending, there is $9.20 of total economic activity, as grocers and farmers pay their employees and suppliers, who in turn shop and pay their bills.

While other stimulus money has been slow to circulate, the food-stamp boost is almost immediate, with 80% of the benefits being redeemed within two weeks of receipt and 97% within a month, the USDA says.

The quick influx of cash into the economy reflects the often desperate situation faced by millions of households struggling to put enough food on the table. For many families, monthly food-stamp allotments rarely last more than a few weeks, leaving them with dwindling grocery supplies -- and sometimes bare cupboards -- by the end of the month.
Angie Minix rushes to her local Save-a-Lot grocery store on Chicago's South Side at the start of every month, when her new food-stamp allocation appears on her card. So do many of her neighbors. "You can't even get in the parking lot," she says.

On a recent shopping trip, she headed straight to the fresh produce section. Before her increase in April to $606 from $525, Ms. Minix said she would rarely even troll the fresh-food aisles. Now, she talks about how she has introduced her two sons to cauliflower, cabbage, lettuce and cucumbers.
Employed by the state as a home aide, she has seen her hours cut and her mortgage payments rise. Still, the food-stamp boost has increased her purchasing power.

"I can't buy a new car, but I can feed my family," she says.

TK: So as bad as things are for the produce industry, they could be worse! (and they are worse for other industries).  I asked these questions  about the state of the economy and the produce economy in the linkedin and the Google Fresh Produce Industry Discussion Group.

Do you have reason for optimism that the economy/produce economy is beginning to turn around? When do you think the economy will be growing again? What's the biggest impact of the recession on the produce industry?

I’d be interested in your thoughts on the questions. I already received this thoughtful reply from Mike of the linkedin Fresh Produce Industry Discussion Group;  from Mike:

The first question is two questions in my mind. The economy and the produce economy react a little different from each other in a recession. With regards to the economy and reason for optimism, well, gosh, I'm an optimist but I have to say no. Not only do I not think the economy is beginning to turn around, I'm not convinced it has bottomed out yet.

Unemployment continues to rise as the rate is officially at about 9.5% with approximately 14.7 million people unemployed. However, that doesn't include people that had not looked for work for 4 weeks prior to the report from the Bureau of Labor Statistics or the people who have given up currently looking for work...that number is an additional 2.2 million. All sectors are being affected and the economy will certainly not turn around before it bottoms out and is flat for awhile in my opinion.

The produce economy on the other hand is somewhat recession proof. People can quit buying cars, homes, limit vacations, driving, movies and they certainly have....but you cannot give up food. I believe the produce economy will continue to be somewhat tough overall even as we enter 2010, but companies whose focus and direction are geared toward value and price will find themselves profitable. I won't predict when the economy will grow again but in a recession, food is not a bad area to be involved in.

The biggest impact on the produce industry in this recession is the need for caution. There is little room for errors in judgment (especially long term ones), the consumer has defined their pattern and we have to acknowledge it, be aware of it and adjust our business models accordingly. I comment a lot  on traceability and one of the buzz phrases is "one-step-up, one-step-down", referring to the Bio-Terrorism Act of 2002. Well, the biggest impact on the produce industry is being aware that the trend set by consumers is "one-step-down".

 I see it in my own actions, I see it from colleagues that are in excellent financial shape and I certainly know more people that have less now, than have more. High end restaurants have a tremendous amount of pressure as clients downscale or decrease their frequency of visits. Family restaurants get some of that high end traffic as their current traffic moves down a step to more fast food venues (which seem overall to be holding their own). The number of meals prepared at home has increased tremendously, throwing pressure on food service companies while increasing traffic in supermarkets. But the high end supermarkets are losing traffic to the value sellers.

In the supermarkets, private brands are doing well as consumers move from national bands as consumers more and more shop for value. In produce, locally grown is growing, partly for freshness and supporting the local community but its more noticeable in price also because of the freight costs of transportation that is eliminated with locally grown. Value AND price is the key for the consumer, we all see it. Produce companies need to be cautious in what they spend, where they spend it and insure they getting value for their expenses.

Retailers have to continue to try to use their arsenal of marketing options, store upgrades, product selection and pricing strategies to try their best just to maintain their market share. Foodservice companies will have continued pressure as the eating out frequency continues to slide somewhat. Value AND price --- My headlights are still on as I drive thru the tunnel because I don't see the light at the end yet.....but I know it will come.