Later this week, We will get another report on the pace of inflation
in the US some hope that it is finally slowing. But you've probably
noticed higher prices at the grocery store already on everything
from dairy to meet to wheat products. The cost of groceries rose
13.5% in the past year. That's the largest increase in 43 years.
Or economics correspondent Paul Solman looks at what's driving those
costs up.
At the Daily market in Boston's Dorchester neighborhood. I asked
agricultural economist David Ortega about food prices. Have you ever
seen anything like this in my lifetime? No. So what? What are the
major factors? First? We have the supply chain disruptions from Covid
that are still lingering those lead to rising energy prices. Rising
transportation costs rising labor costs.
On average 16 cents out of every dollar spent on food can be tied
back to the farm. Everything else the vast majority has to do with
things like processing, cost transportation, the wholesale and the
retail trade.
And then we've seen all of those prices go up.
Meanwhile, another cost driver climate change if we look at the heat
and drought that's taking place out west in California. That's where
a lot of our produce is coming from. A lot of those crops are lower
in yield because of heat stress some field crops and that's less
food available in the market and which puts upward pressure on prices.
And then, of course, there's the war in Ukraine. That region is what's
called the bread basket of Europe, major supplier of wheat and sunflower
oil, which goes into a lot of processed food products, so that set
off rising commodity prices on the global market. Um they have started
to come down from their highs back in April and may, But it takes
time for all of that to work its way down the supply chain to consumers.
Finally, there's the foul factor the bird flu outbreak this year.
It's the second largest outbreak we've seen in modern history. It's
affected over 40 million birds, many in commercial operations, and
that sense the price of poultry and eggs surging
is evident on store shelves. Eggs are up 40% year over year, and
the fear is is that
We're going to see further outbreaks. As we get into the cooler months.
The price may go up even further
at all depends on what happens if you plan to beat inflation by breakfasting
on cereal instead of eggs. Think again.
When we look at wheat and processed products, they're up just above
20%. Year over year life cereal life? Yes, life. So that's 5 49 for
this box here. Yep. Small box. A lot of that has to do with the rising
grain prices from the Russian Ukraine conflict, the cost of butter
up close to 30% energy costs. Transportation costs that are needed
to make butter are all high When it comes to climbing coffee costs.
Climate change is the culprit, says Ortega in general
We're looking at about almost 20% more expensive than last year.
A lot of this is tight to adverse weather around the globe, especially
in coffee producing regions like Brazil.
That saw frost and drought last year, and that's you know, put upward
pressure on prices. It's a shock every time I want to get groceries,
consumer reaction sticker shock, young professional here and just
earning your salary, so it's pretty hard to get by like this
people with them.
I don't know how my wife was from a family of 14. People have eaten
four or five. I mean, it sucks. I mean, I got that I feel for the
customers, but, um, it's it's just not. It's not abating. James Baker
owns the daily Market. We have a load that came in today with 13
pages of price changes. We have to make.
Right right here. So we'll have price tags. We have to put on the
shelf to change the prices and increase them. This is risky Race.
Brown So brown rice previous price 5 39 Retail Price 7 49
from week to week. No, this we get this once a week. You know, I'm
looking down.
Here. There isn't an item that hasn't gone up in price. There's a
few. Not many.
Oh, yes.
Dalmatian to spread FIG.
Went from 6 79 to 6 29 Look at that We have a winner. Like many
consumers. Small businessman, Baker believes corporate opportunism
is also helping drive up prices, parts of the food industry that
have been consolidated and where there was more competition. Previously,
there's not as much competition
You talked about the major pork providers involved in consolidated
so that the company can drive their profit margin up and maintain
the higher price.
Our customers moving from more expensive to less expensive substitutes.
Some of that's happening. We've we carry a lot of higher red chicken
product, and we have now brought in a good quality chicken prag,
but much more affordable and you're seeing that moving off the shelf
quite a bit. Economist Alberto Carvahlo, whose billion prices project
tracks prices daily online.
Says more demand for cheaper products is driving up. Their price
is much faster. We actually found that the cheaper varieties at the
beginning of the pandemic have experienced nearly twice as much inflation
as the most expensive varieties. And why is that happening? Well
as people are substituting into cheaper goods, they're increasing
the relative demand that pushes prices up in this context of very
limited supply overall.
No wonder Higher prices are busting American budgets, devastating
paycheck to paycheck households who spend a higher percentage of
their budgets on food. But David Ortega notes that food inflation
is creating catastrophe elsewhere in the world places in North Africa,
the Middle East, their food prices surging 2030 in some cases, even
about 50%. So those countries in worse shape than what we have here
in the US
We also look at regions and the Horn of Africa there are on the verge
of famine, and that's a very critical situation. Okay, the final
big question when, if ever will food inflation slowed down? We hope
that prices start to moderate or at least the rate of increase starts
to moderate. But because the rate of increase starts moderating doesn't
mean that prices are going to come down, and that's important to
keep in mind.
When we talk about inflation, we're talking about the rate of increase
in prices. Um, and so when that starts to calm down, it just means
that prices are rising. But just not ask quickly. I think most of
us would say we'll take what we can get for the PBS news hour, Paul