U.S. inflation surged to a four-decade high of 8.5 percent in March thanks in part to skyrocketing food costs.
The last time Americans saw prices rise as fast at the grocery store or at their local diner was in December of 1981 in the early days of Ronald Reagan’s first presidential administration.
Food-at-Home and Food-Away-From-Home Prices Keep Rising
The USDA Economic Research Service adjusted their food price outlook in March 2022 with overall food prices in February 2022 registering 7.9 percent higher than February 2021.
Breakdown between in home and away from home food prices:
- The food-away-from-home (restaurant purchases) CPI increased 0.4 percent in February 2022 and was 6.8 percent higher than January 2021; and
- The food-at-home (grocery store or supermarket food purchases) CPI increased 1.4 percent from January 2022 to February 2022 and was 8.6 percent higher than February 2021.
In 2021, food-at-home prices increased 3.5 percent and food-away-from-home prices increased 4.5 percent. The CPI for all food increased an average of 3.9 percent in 2021 with beef and veal prices spiking 9.3 percent over the year.
Beef and other prices were even higher in the February 2022 report with
- Beef and veal up 16.2 percent year-over-year
- Pork up 14.0 percent year-over-year
- Poultry up 12.5 percent year-over-year
- Fish and Seafood up 10.4 year-over-year
- Eggs up 11.4 percent year-over-year
- Fresh Fruits up 10.6 percent year-over-year
Food prices are going even higher this year with the USDA predicting: “All food prices are now predicted to increase between 4.5 and 5.5 percent; food-away-from-home prices are predicted to increase between 5.5 and 6.5 percent; and food-at-home prices are predicted to increase between 3.0 and 4.0 percent in 2022.”
No Food Category is Spared in Price Increases
Not only are all food categories slated to keep rising this year, but the USDA revised its estimates for just how high food prices would rise, with a forecast of higher prices in 2022 for:
- Poultry prices predicted to increase between 6.0 and 7.0 percent
- Beef and veal predicted to increase between 3.0 and 4.0 percent
- Egg prices predicted to increase between 2.5 and 3.5 percent
- Dairy product prices predicted to increase between 4.0 and 5.0 percent
- Fats and oils prices predicted to increase between 6.0 and 7.0 percent
- Fresh fruit prices predicted to increase between 5.0 and 6.0 percent
- Processed fruit and vegetable prices predicted to increase between 4.5 and 5.5 percent
- Sugar and sweets prices predicted to increase between 3.0 and 4.0 percent
- Cereals and bakery product prices predicted to increase between 3.0 and 4.0 percent
Several Factors Making Food Costs Rise
There is not just one factor creating the rise in food cost but multiple things at play around the world including:
- Rising energy prices, including transportation costs, currently driven by the Russian invasion of Ukraine
- The conflict in Ukraine will also affect world wheat prices
- Avian influenza reducing poultry and egg supply could put pressure on prices
- The cost of labor is rising in all sectors, including food and beverage, driving up food costs
- Supply chain constraints has created shortages of products and ingredients, thus rising prices
- Extreme weather events around the globe such as the deep freeze last year in Texas
“Food prices are on the rise as inflation issues persist due to labor shortages, supply chain blockages, soaring energy costs, and other issues,” said the U.S. Chamber of Commerce.
Chain Reaction Leading to Higher Food Prices
The final price consumers see on their grocery store bill or on their restaurant receipt is the result of factors that can feel far removed from their supermarket carts or dinner plates.
The price of chicken feed, for example, skyrocketed last year after winter storms in the south, leading to soaring poultry and egg costs.
“Before the great freeze our feed was $305 a ton, and it went up to $500 a ton--that’s a lot,” Texas-based farmer Ken Smotherman, who specializes in laying hens, told KWTX last September.
Another area, soybean prices, affects how much food ultimately costs as just over 70 percent of the soybeans grown in the U.S. are used for animal feed including poultry, hogs, dairy, and beef.
Farm-level soybean prices increased by 11.4 percent in February and are predicted to increase between 8.5 percent and 11.5 percent in 2022.
Wholesale fats and oil prices were up 6.0 percent in February and were projected to soar between 27.0 and 30.0 percent in 2022 due to low production and inventories internationally.
The reality is that increases in the cost of doing business on the farm or wholesale level always trickles through the food supply chain to consumers, and Americans should be prepared as the USDA released the following numbers in March:
- Farm-level cattle prices climbed 6.8 percent in February 2022, which is 24.7 percent above the price a year ago
- Wholesale beef prices are predicted to increase 4.0 to 7.0 percent in 2022 with farm-level cattle prices rising 12.5 to 15.5 percent
- Wholesale poultry prices rose 4.1 percent in February, up 26.5 percent from a year earlier. Prices are predicted to go up 9.0 to 12 percent in 2022.
The situation in Ukraine will also continue to play a developing role with the USDA reporting that “the conflict in Ukraine is expected to put upward pressure on international wheat markets. Farm-level wheat prices are now predicted to increase between 20.0 and 23.0 percent and wholesale wheat flour prices are predicted to increase between 12.0 and 15.0 percent in 2022.”
For now, Americans should expect to continue to pay higher prices for the rest of 2022 while holding out hope that prices crest in August.
“Higher prices are likely here to stay for the rest of the year, supermarket executives said, and the pace of price increases from vendors—some of which grocery stores pass along to shoppers—has yet to slow down. Some grocery executives said they expect inflation to plateau by the end of summer,” reported the Wall Street Journal.
