Just as the rising input costs of inflation are making food production more difficult for farmers, consumers are also continuing to see rising prices as they fill their grocery carts.

The November Consumer Price Index (CPI), as measured by USDA’s Economic Research Service, for food was up 0.5% compared to October. It was also 6.1% higher than November 2020.

Consumers who prepared meals at home fared only a little bit better on the cost side than those who chose to eat out more in 2021. Food prices at grocery stores and supermarkets were 3.1% higher year-to-date through November when compared to 2020, while prices for food purchased away from home rose 4.2%. Both categories jumped from October 2021 to November 2021.

There’s not much indication prices will recede, either. The authors of the report expect 2022 food prices to climb 1.5% to 2.5% at grocery stores and 3% to 4% away from the home.

USDA noted that prices for food at home and food away from home generally grew at a similar pace for decades. But since 2009, costs for food used away from the home have been climbing more significantly. The two came back closer together for a period due to the onset of the pandemic in 2020 and higher prices at grocery stores.

Meat tops the list

The CPI also tracks food at home prices by category, and every category recorded at least some price increase over 2020. The beef and veal category jumped the most, up 8.7%.

Rising meat prices are at the center of the Biden Administration’s efforts to reduce food costs. Last July, an executive order directed USDA to look more closely at the Packers and Stockyards Act passed in 1921 to ensure competition and protect consumers. The temporary shuttering of meat plants and supply chain backups in 2020 highlighted the need for more processing capacity just to keep product on shelves, let alone maintain fair prices.

Biden has met with farmers and ranchers to hear their concerns and announced plans to direct $1 billion from COVID-19 relief funds to help independent meat processors expand. According to the White House, the top four companies control 85% of the beef market. Resources will also be directed to processing facility employee development and technical assistance.

Reactions to the plan have varied. The American Farm Bureau Federation has stated their appreciation for the effort to ensure competition in the market and secure fair prices for farmers. However, the North American Meat Institute expressed doubt that the intervention will be helpful, saying that the real challenge for meat production is labor shortages.

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(c) Hoard's Dairyman Intel 2022
January 6, 2022
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