The Puzzling Case of the Missing Schmear

What put me on the case was this post by Joe Gandelman on the New York cream cheese shortage:

Let out a challah: There’s a cream cheese shortage in NYC. Are we close to the day when there are bagels without cream cheese????

As an illustration of how serious the shortage is, I’ve read reports of desperate New Yorkers using Crisco on their bagels. The very thought is enough to chill the blood.

A little background on cream cheese. It’s a fairly simple product that has been around for about 150 years containing just milk, cream, and lactic acid. The stuff you generally buy in the grocery store adds various gelling agents (carob gum, guar gum, xanthan gum), salt, and various preserving agents to improve the product’s shelf life.

There’s a considerable difference between the cream cheese you buy in the store and the product used by bagel stores. They start with a basic cream cheese and mix it themselves.

There is no shortage of milk or cream, at least not according to the USDA. Demand for lactic acid has soared in recent years due to its use in bioplastics. We’re in the middle of a trade war with China over xanthan gum—basically, they’re dumping it on the U. S. market. We import xanthan gum from India and China. Carob gum is mostly imported from Europe and guar gum from India and Pakistan.

There is a shortage of lactic acid. The infographics here summarize our imports and exports of lactic acid. Chinese exports of lactic acid have declined sharply and its imports increased somewhat.

I found no evidence of a shortfall in labor or trucking issues contributing to the cream cheese shortage. Based on what I have found I would speculate that the problems with cream cheese are (in no particular order):

• Product competition between wholesale and retail customers
• Competition for lactic acid with non-food producers
• Problems with West Coast ports
• Environmental regulations and increased land values

But let’s consider two more basic questions. First, why are we adding anything besides milk, cream, and lactic acid to cream cheese? Adding the gelling agents and preservatives does not produce an improved product. Quite the contrary it produces a worse product. But it does enable food producers to lower costs (by reducing the amount of cream required) and it allows wholesalers and retailers to store the product longer. That doesn’t improve the product but it does reduce their costs.

I would add that there’s a sort of Gresham’s Law in food products—the bad drives out the good. It used to be much, much easier to buy cream cheese that was actually cream cheese. Increasingly, it’s becoming all but impossible.

Second and possibly more importantly why don’t we produce much, much more of what we consume? In the case of cream cheese it certainly isn’t labor costs—making cream cheese is not a labor intensive activity. I’m open to other suggestions but I suspect that ill-considered regulations, rising land values, tightening margins, and unfair foreign competition (subsidies, dumping, etc.) are major contributing factors.