Sticker shock in meat aisle: Food prices climbing as holidays approach

PORTLAND, Ore., Nov. 5 (UPI) -- Thanksgiving dinner will be more expensive this year.

As the economy continues its recovery from the COVID-19 pandemic, it has brought higher costs to consumer goods ranging from new cars to furniture. One of the most noticeable increases is food.

The most recent Consumer Price Index shows that in September the price of food rose 4.6% from a year ago with increases across all major grocery categories. Prices for cereals and bakery products are up 2.7% from a year ago. Nonalcoholic beverages are up 3.7% and dairy products up 0.6%.

These increases are higher than the 20-year annual average increase of 2% for food bought at grocery stores.

The biggest sticker shock is likely to come in the meat aisle. Meats, poultry, fish and eggs saw an even bigger 10.5% increase from a year ago. Beef and veal saw the highest price increases at 17.6%, followed by pork at 12.7%.

As Thanksgiving day approaches, the Department of Agriculture expects there to be fewer frozen turkeys for sale, and they will cost more than previous years.

Many factors at play

Driving the escalating cost of a trip to a grocery store is a rare convergence of factors that could have lasting effects. Like other parts of the economy, agriculture faces higher transportation costs, a smaller labor pool and disrupted supply lines, in addition to more specific challenges.

An outbreak of African swine flu in China has increased demand for pork and animal feed as the country seeks to build back its hog herd. Winter storms, cyberattacks and bottlenecks at processing facilities have made it harder to bring meat to market. Farmers in Western states face ongoing water shortages, and nearly half of the United States' alfalfa hay acreage, an important livestock feed, is in severe drought conditions. Wheat stocks hit a 14-year low after a small harvest.

"The fact is, it's like whack-a-mole," Vivek Sankaran, CEO of Albertsons grocery store chain, said on a recent conference call. "On any given day, something is out of stock in the store."

Ryan Jacobsen, CEO of the Fresno County Farm Bureau in California, said farmers and ranchers aren't seeing profits from increased food prices. Instead, the added costs are tacked on further down the supply chain in processing, transportation or refrigeration.

"We are price-takers not price-makers just for the simple fact that a great majority of our crops compete worldwide," he said.

Veronica Nigh, economist at American Farm Bureau Federation, said during a media call Thursday that only 8% of total cost of food is related to farming and the rest are tacked on as products move through the economy.

Still recovering

The United States' exactingly calibrated food supply chain is still recovering from the initial shocks felt early in the pandemic.

James Sterns, associate professor of applied economics at Oregon State University, said that before the pandemic, supply chains had become increasingly efficient with access to inexpensive transportation to move goods.

"In that system of highly committed supply chains, you can squeeze out a lot of costs, but you have zero flexibility," he said.

The food supply chain was similarly specialized to deliver often perishable products packaged in just the right way for restaurants, grocery stores or schools and other institutions, he said. But that left producers with few options when the pandemic closed schools and restaurants early on, he said.

He pointed to how farmers left crops to rot, dumped excess milk and euthanized chickens as markets evaporated early in the pandemic.

Meatpacking facilities face ongoing problems. Facilities closed or slowed in response to COVID-19 outbreaks among employees working in close quarters. That caused meat shortages and bottlenecks in processing capacity.

Sterns said meatpacking facilities are designed to process a specific number of animals at specific weights. But cows and pigs kept growing during the closures, further complicating their operations.

Processing facilities are largely back up to speed since last year. But the rapid transition of meat supply chains away from restaurants to grocery stores added costs, along with additional safety measures to protect workers, according to a USDA report.

Nigh said the impacts of last year's slowdown will be felt for another year. It takes over a year to prepare animals for slaughter and slowdowns mean less frozen meat, she said. Additionally, consumer demand for meat products has stayed unexpectedly high with consumers stuck at home with extra money.

"They ate their feelings and ate more meat products," she said.

Shane Otley, who owns a 415-acre ranch in eastern Oregon, said the market is still flooded with cattle. He said there are bottlenecks at processors, and ranchers want to sell more of their cows because the price of hay has increased and there is less water because of droughts.

The price of younger "feeder cows" has stayed steady. But he said he gets around $400 for a cow he would normally get $700 or $800 for -- an improvement from last year's $300. Otley said he slaughters some cows himself and sells them locally for $780.

"It's viable; I can make it work," he said. But larger ranches don't have the same option, he said.

Higher costs

As job openings have surged, the Meat Institute has blamed higher food prices on labor shortages.

Robert Wiedmer, assistant professor of supply chain management at Arizona State University, said COVID-19 exacerbated existing agricultural labor shortages. He said older or medically vulnerable workers may look for less risky work.

"That is a big, big issue and that has not been resolved," he said.

The good news, Wiedmer said, is that there likely won't be any serious shortages. The United States doesn't rely on imports for food, so shipments won't have to go through already backed-up ports.

But he said changing supply chains and demand patterns might mean consumers have to pay more for certain products. Climate change also means some water-intensive crops like almonds and grapes will cost more, he said.

Roger Cryan, chief economist for the American Farm Bureau Federation, said during a media call Thursday that the pandemic created "spot fires" throughout the economy that have slowed things down. But in the big picture, he said agriculture has done relatively well, and consumers can expect food to remain on shelves -- even though it costs more.

Sterns said the market will eventually settle, and supply chains may become more resilient. But with the pandemic still ongoing, uncertainty remains, he said.

"In some ways, the crystal balls are all broken," he said.