Sorry shoppers, food prices are likely to continue to rise. Here’s why.
Industry data shows Americans are spending more on food than before. In a nod to the times, it sent food prices soaring amid the sharpest US inflation in 40 years.
“Customer demand continues to outpace our ability to provide products,” Tyson Foods CEO Donny King said on a quarterly earnings call in February. Tyson’s average sales price for the quarter was up nearly 20% from last year, helping the meat company offset higher costs including labor and transportation costs.
Federal data shows Americans are paying 10% more to buy food at the grocery store than last year, with beef prices up 16%.
Looking at grocery store and restaurant purchases, food prices in March rose about 9% from a year ago amid higher demand over the past year, according to Bank of America Securities analyst Alexander Lane.
“Americans are eating more than they have in the past, constraining retail stocks,” he said in a report.
Lin also expectsUkraine to lead to “sustained price increases” in the US later this year and into 2023.
Lin noted that while most of what Americans spend on food has to do with marketing and other expenses that have nothing to do with American farms, costs still go up and down the supply chain.
TheLike fertilizers and pesticides, they are up 50% over the past year, with pressure increasing in Ukraine, where Russia is a major exporter of nitrogen, potassium and phosphorous fertilizers.
The USDA expects all food prices to rise between 4.5% and 5.5% this year.
Rising energy and transportation costs affect many things, including food. Trucking is the primary means of transporting food products, and the industry was already dealing with a driver shortage before the pandemic. Trucking costs have skyrocketed during the pandemic.
Another factor driving up food prices: the worst outbreak of bird flu since 2015, affecting commercial flocks and backyards in 29 states, according to a federal count. It also really drives up egg prices, and poultry costs may not be far behind. The USDA said it now expects poultry prices to rise between 6% and 7% and egg costs to increase from 2.5% to 3.5% this year.
Rising labor costs are another factor, Lin said, but “companies have regained pricing power and are comfortable passing these costs on to the consumer.”
The resulting expansion in corporate margins has drawn more negative opinions from a watchdog group, which last week released a report confirming that some of the nation’s largest retailers had used a spike in inflation..