This is a sign that times are changing, as it drives up food prices in the midst of the most severe bouts of inflation in the U.S. in 40 years.
Donnie King, CEO of Tyson Foods, stated that “customer demand continues outpace our ability supply products.” The average sales price of Tyson for the quarter increased nearly 20% over a year ago. This helped the meat company recover higher labor costs.
Americans pay 10% more to buy food at the grocery store than they did a year ago. Beef prices have risen 16% according to federal data .
Alexander Lin, BofA Securities analyst, said that March’s food prices were almost 9% higher than a year ago, despite a surge in demand.
He stated that Americans are now eating more than ever before, which has strained retail inventories.
Lin expects that Russia’s invasion Ukraine will lead to “sustained prices increases” in the U.S. during this year and beyond.
Lin pointed out that while most Americans don’t spend much on food, it is mostly due to marketing expenses and other expenses not related to U.S. farmland. However, prices are still increasing up and down the supply chain.
The price of agricultural chemicals like fertilizers and pesticides has increased 50% in the last year. This is due to the conflict in Ukraine, which adds further pressure, as Russia is a major importer of nitrogen, potassium, and phosphorous fertilizers.
USDA predicts that all food prices will rise between 4.5% to 5.5% in the coming year.
Food is one of the most affected by rising energy and transport costs. The primary mode of transport for food products is trucking, and the industry had already experienced a shortage in drivers prior to the pandemic. During the pandemic, trucking costs increased.
A federal tally shows that the worst avian flu outbreak since 2015 is driving up food costs. It has affected backyard and commercial flocks in 29 US states. This is also pushing up egg prices and possibly raising poultry costs. According to the USDA, it expects that poultry prices will rise between 6% to 7% this year and egg costs to go up from 2.5% to 3.5%.
Lin stated that higher labor costs are another factor. However, “companies have regained their pricing power and are happy passing these costs on to the consumer.”
One watchdog group was more critical of the resulting increase in corporate margins. It released last week a report claiming that some of the country’s largest retailers used rising inflation as to raise prices and profit.
