By Nathalie Voit
Food prices have soared to their highest levels in decades as governments worldwide continue to reel from the economic impact of the pandemic. According to data from the United Nations Food and Agriculture Organization (FAO), food prices in August were up 33% from one year ago, with the biggest increases reported in the vegetable oil, grains, and meat sectors.
In the U.S., the Consumer Price Index (CPI) for all items rose 5.3% over a 12-month period ending in August 2021, reducing the purchasing power of consumers when it comes to everyday living costs. Food inflation, in particular, has become worrisome. Higher global shipping costs and labor shortages have resulted in massive production delays and shipping bottlenecks.
According to the Bureau of Labor Statistics, food prices on average increased 3.7% since last August. The change tracks two major categories: grocery store prices, which increased 3.0% (with five of the six major grocery stores in the country reporting price hikes), and prices for dining out, which increased 4.7%.
U.S. suppliers are feeling the squeeze. The widespread labor shortfall is affecting the ability of wholesale distributors to operate at normal capacity. Major distributors like Sysco Corp and United Natural Foods Inc. are experiencing production delays and slowdowns for common food items like cheese, spices, and bacon as companies continue to scramble for staff, Bloomberg reported.
Several factors are impacting the country’s labor supply. The threats posed by the ongoing pandemic and the impact of the delta variant means many workers are reluctant to take jobs out of fear for their health. Federal unemployment benefits have also skewed the bargaining power towards workers.
The current environment is generating “choice where choices may not have existed in the past,” said Decker Walker, Boston Consulting Group’s agribusiness expert in Chicago.
The impact has been particularly evident in food and agriculture, which ranks among the world’s least automated industries. Workers that would have otherwise settled for strenuous and low-paid employment in the food supply chain are becoming pickier with where they apply.
“The general theme seems to be: The roles with the least desirable working conditions” are the hardest to fill, said Walker.
The sudden staff shortfall means many companies are trying to lure workers with benefits like higher wages and perks. To compensate for the increased costs in labor, many companies are choosing to outsource the costs to consumers and buyers in the form of higher menu prices or more expensive groceries.
“With the inflation we’re seeing in the business and the inflation that we’re seeing at the farm level, it’s going to translate to the shelf,” said Patrick Criteser, chief executive officer of Tillamook County Creamery Association, an Oregon-based dairy co-operative.
