Rising Food Costs; Today and Tomorrow

You’ve most likely heard it on the news in recent years
that inflation is in check and the Federal Reserve is not
concerned about it. The exception in recent months has
been periodic stories about the big jump in lumber prices
which has increased the price of a new home.

Food prices don’t get as much attention but the astute
consumer can sense when the total of their grocery bill seems
to be creeping up. Food inflation is a real concern presently

With food prices, the ingredients for price increases can
lead back to the prices of the raw products needed to
produce the foods on the grocery store shelf. Those raw
materials prices have been soaring during 2021.

The Bloomberg Agriculture Spot Index, which tracks key
farm products, saw its steepest surge in almost nine
years the week ending April 23, 2021. Global food prices
are already at their highest rate since the middle of 2014.

Globally, food costs have surged for 10 months in a row.
That is the longest rally in a decade. Major commodities
like sugar, oils and wheat continue to rise and eventually,
manufacturers have to pass those costs on to consumers.

According to the U.S. Department of Agriculture,
Consumer Price Index increase for food prices was
up 3.5 percent from March 2020 to March 2021.

Higher Prices Ahead

At a time when world economies are attempting to
recover from the damage caused by the COVID-19
pandemic, the steep jump in food prices is concerning
to economists. This is a cost that consumers can’t avoid
at a time when many people are out of work or are relying
on less income.

Worse, some economists believe that this isn’t just
a blimp on the radar but the beginning of a trend that
will see increasing food prices well into the future.

Raw material prices are partly to blame with corn
prices doubling from April 2020 to April 2021 and
soybean prices up 80 percent, while wheat prices are
up 30 percent.

Some of the price hikes can be traced back to adverse
weather in Brazil and the U.S. and increased imports into
China as the country’s economy continues to recover.
Price increases in the materials used in packaging are
also contributing to the price hikes.

For 2021, the Agriculture Department is projecting “foodat-home prices” to increase between 2.5 and 3.5 percent. The agency says that recent winter storms in the Midwest and Texas have disrupted the supply of beef. Despite this,
the predict an increase in pork products with little impact
on beef products.

More substantial increases are seen for fresh fruit with
prices predicted to increase two to three percent during
the year. The Agriculture Department sees steeper
increases in the Producer Price Index (PPI); a measure
of prices paid to domestic producers.

They see a price increase for pork at the wholesale level
between 4.5 and 7.5 percent; and wholesale poultry prices
are now predicted to increase between 5.0 and 8.0 percent.

While increased vaccine distribution and improving job
numbers are helping return life to semi-normalcy, the
increase in grocery prices, alongside rising gas prices,
are not welcome developments.