May 15, 2020

Why the Price of Groceries Is Increasing

Major disruptions in both supply and demand are the primary culprit.

Some 36.5 million Americans have filed for unemployment over the last eight weeks as a result of the coronavirus shutdown. Meanwhile, “Grocery prices showed their biggest monthly increase in nearly 50 years last month,” The Washington Post reports. “U.S. consumers paid 4.3 percent more in April for meats, poultry, fish and eggs, 1.5 percent more for fruits and vegetables, and 2.9 percent more for cereals and bakery products, the Labor Department said. Overall, consumers paid 2.6 percent more in April for groceries, the largest one-month jump since February 1974.” At the same time, livestock prices are lower, and thousands of animals are being slaughtered without providing meat.

Christopher Bedford, senior editor at The Federalist, explains what happened to disrupt the food supply, in turn skewing prices. There are a myriad of factors, from regulations we’ve noted to sick workers and shuttered food-production facilities — facilities that have been increasingly consolidated over the last 40 years. But Bedford ultimately boils it down to one overarching theme: “The broader problem appears to lie in an unbelievably rapid shift in Americans’ eating habits, and thereby the American food economy.”

He interviewed John Rieley, “a former Sysco food company sales rep and a current councilman for the nation’s top chicken farming county, Sussex Country, Delaware,” who says that our “finely tuned system” has had to make rapid and major changes. Bedford says, “While in the mid-1980s, Americans still spent the majority of their food budget at retail grocery stores, that number has steadily declined, and in 2010, eating-out spending surpassed at-home for the first time. At the opening of 2020, Rieley estimates, only ‘40 percent of what farmers produced may have gone into retail.’” Bedford adds, “While less than half of products once went to retail, Rieley now puts that number closer to 80 percent.”

That massive shift matters because the needs are different. Take chickens, for example. If you order chicken nuggets at your local fast-food establishment, they likely came from a three-pound chicken. The one you buy at the grocery store, however, is probably a five-pound bird. The same process change is true for pork or beef.

“Dairy’s another good example,” Rieley explains. “The milk that would go toward food service would end up in ice cream mix, little portion-packed creamers, five-gallon boxes of milk for the cafeteria, stuff like that. Stuff that’s geared for the supermarket, they just put in quarts, half gallons and gallons.”

The end result is that milk is being dumped and animals are being destroyed, all while shelves at your local grocer are bare. Yet selling directly to customers isn’t an option for reasons of regulation and liability, and quite often neither is bypassing the chain to go directly to a grocery story. Hence the price increases.

And yet Quality Milk Sales group CFO/COO Rance Miles sees reason for hope: “The cleverness and the ingenuity of the American people, and businessmen especially — to see them navigate and do some of the reallocating of resources just gives me, gives you, some hope for sure. You go, ‘Man, these guys are resilient.’”

Remember that when some leftist coastal elitist tells you how easy it is to be a farmer.

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