Fitch Ratings, New York, said Friday reductions in Supplemental Nutrition Assistance Program (SNAP) payments may have a negative impact on food companies once the Agriculture Act of 2014 becomes law.
Under the Farm Bill, SNAP benefits — which amounted to approximately $76 billion in 2013 — will be cut by $8.6 billion over the next 10 years.
SNAP benefits, which were reduced last November by approximately $29 per month for a family of three, could be reduced as much as another $90 per month for an estimated 850,000 low-income households under the Farm Bill, Fitch said.
According to Fitch, the reductions could affect spending on products like milk and snacks, possibly causing a shift toward lower-priced private label foods.
"There may also be a slight shift toward farmers’ markets, as the farm bill allows the doubling of food-stamp benefits at these types of markets to encourage consumption of more nutritious food,” Fitch pointed out.
“The new law’s reductions in SNAP payments will further constrain spending for already cash-strapped consumers.,” the agency said. “The bifurcation of consumers continues, with higher-income consumers faring well but middle- and low-income consumers remaining severely cost-conscious and searching for food products on promotion. Packaged food companies have already reported weakness in growth for packaged foods in the center of the store where shelf-stable foods are sold.”
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