Myra P. Saefong
Meats have led the rise in U.S. food costs, with prices for fresh fruits and cereals, including those made from oats, also strongly higher this year, on the back of drought conditions in parts of the nation.
And restaurant menu price increases, known as “food-away-from-home” prices, have outstripped the rise in “food-at-home,” or retail store prices.
There was a general “lack of flexibility” across restaurant menus, given higher labor costs and tighter inventories of specific food items, says Isaac Olvera, lead food and agricultural economist at ArrowStream, a food-services industry supply-chain technology firm. That all contributed to the increase in menu prices since the onset of the pandemic, he says.
The consumer price index in September for the food-away-from-home category was 4.7% higher than the same month a year ago, while the food-at-home CPI was up 4.5%, according to the U.S. Department of Agriculture .
Labor remains a large challenge, and COVID-related protocols, such as those related to employee proximity, are “keeping plants from operating at 100% capacity,” says Olvera.
A USDA report in September noted that the “physical proximity” of workers in the meatpacking industry was was much greater compared with other manufacturers. Meatpacking-dependent U.S. counties saw nearly 10 times more COVID-19 cases in early May, compared with other manufacturing-dependent counties.
Meat demand, meanwhile, remains “robust” despite record high pricing in most cases, with demand coming in strong from a domestic as well as international level, as the U.S. continues to “export meat protein products at a robust pace,” Olvera says.
On the futures market, prices for live cattle /zigman2/quotes/219317884/delayed LCZ21 -0.02% /zigman2/quotes/210112807/delayed LC00 -0.39% and feeder cattle /zigman2/quotes/224262632/delayed FCF22 -1.10% /zigman2/quotes/209978659/delayed FC00 -1.10% were each up by over 13% this year as of Oct. 28, and lean hogs /zigman2/quotes/218987889/delayed LHZ21 -0.71% /zigman2/quotes/210116419/delayed LH00 -0.76% up 7% .
Olvera points out that “the pandemic-led, to-go movement has been a boon for the industry,” as foodservice sales have pushed above grocery store sales.
Beef and veal, as well as pork, prices are predicted to rise by between 6.5% and 7.5% this year, according to the USDA.
“We wouldn’t be surprised to see that as too low heading deeper into the fourth quarter,” especially on the beef side, says Olvera. The USDA’s 7.5% increase forecast for both red meat categories are “likely to the lower end of our expectations,” which remain closer to the 7% to 9% range for the red meat categories.
Fresh fruits are another big mover this year, with labor, transportation, drought and demand leading to the price increases, he says.
As of Oct. 28, more than 83% of California, which is among the biggest fruit-producing states, was in an “extreme drought,” which means water is inadequate for agriculture, wildlife and urban needs, according to Drought.gov . The recent, severe storm wasn’t expected to put much of dent into that drought.