August
Metanoia
Food prices are soaring faster than inflation and incomes and the timing couldn’t be worse
In Indonesia, tofu is 30% more expensive than it was in December. In Brazil, the price of local mainstay turtle beans is up 54% compared to last January. In Russia, consumers are paying 61% more for sugar than a year ago.
Emerging markets are feeling the pain of a blistering surge in raw material costs, as commodities from oil to copper and grains are driven higher by expectations for a “roaring 20s” post-pandemic economic recovery as well as ultra-loose monetary policies.
Consumers in the U.S., Canada and Europe won’t be immune either as companies — already under pressure from pandemic-related disruptions and rising transport and packaging costs — run out of ways to absorb the surge.
“People will have to get used to paying more for food,” said Sylvain Charlebois, director of the Agri-Food Analytics Lab at Dalhousie University in Canada. “It’s only going to get worse.”
While never welcome, the coming round of food inflation will be especially tough. As the pandemic wrought havoc on the global economy, it ushered in new concerns about hunger and malnutrition, even in the world’s wealthiest countries.
In the U.K., the Trussell Trust gave out a record 2,600 food parcels a day to children in the first six months of the pandemic. In the U.S., the Covid-19 crisis pushed an additional 13.2 million people into food insecurity, a 35% jump from 2018, according to estimates from Feeding America, the nation’s largest hunger-relief organization.
In the U.S., prices rose close to 3% in the year ending Jan. 2, according to NielsenIQ, roughly double the overall rate of inflation. That small jump adds up, particularly for families already near the edge. The poorest Americans already spend 36% of their income on food, according to the U.S. Department of Agriculture, and mass layoffs in lower-wage work like retail and transportation have increased the strain on household budgets.
Meanwhile, the price of staples like grains, sunflower seeds, soybeans and sugar have soared, pushing global food prices to a fresh six-year high in January. They’re not likely to fall any time soon, thanks to a combination of poor weather, increased demand and virus-mangled global supply chains.
Developed markets tend to be insulated from short-term price spikes, because food is more processed and the food chain is more elaborate. In the process of turning a bushel of corn into a bag of Tostitos, food companies have a lot of room to absorb incremental costs, said David Ubilava, a senior lecturer at the University of Sydney who specializes in agricultural economics. But when costs stay high for a sustained period of time, companies start thinking about how to pass them on.
“We are experiencing inflation right now as is everybody else,” Conagra Brands Inc. Chief Executive Officer Sean Connolly said in an interview. Costs are up for oils, pork and eggs, plus packaging materials like cardboard and steel. The company, parent to more than 70 brands including Birds Eye, Chef Boyardee, and Udi’s Gluten-Free, says raising prices is one of the levers it could pull this year to counter rising costs.
General Mills, the maker of Cheerios, Yoplait and and Blue Buffalo pet food, is also looking at price increases, said Jon Nudi, who leads the North American retail division, at least “in the areas we see significant inflation.” Dave Ciesinski, Chief Executive Officer of Lancaster Colony Corp., which makes the Marzetti brand and others, said they anticipate a sustained period of rising costs. The company is going to have to figure out how to “justifiably or appropriately pass on these costs,” he told analysts in an earnings call.
Even the cost of white label goods — also known as house brands — is likely to go up, notably in the second half of the year, said Steven Oakland, CEO of Treehouse Foods, which makes products for grocery stores to sell under their own brand names. “We’re working very closely to decide what can we mitigate,” he said. “What do we need to pass on? What’s the right movement with the consumer?”
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Yep bananas here were $3 a kilo now they are $13 a kilo. The rest will follow.