Take a look at this chart. It shows the cost of food in the
U.S. steadily rising over the past five years.
The price increases have been mostly driven by supply related
factors. It has been like a perfect storm.
Probably the number one reason has to do with climate change.
Adverse weather in major production is that out in
Argentina, Brazil, California, or excess rains in some parts of
Europe and China. So Mother Nature is not working in favor
of food production.
We've got a huge transportation problem.
Labor in general is becoming more expensive.
These rising prices can have serious consequences.
Food insecurity, particularly, it's truly a wicked problem, a
problem that has much nuance to it and is multifaceted.
Disparities have always existed in terms of access to food. And
so even before Covid, there were 35 million Americans who lived
in households that were struggling to put food on the
table. So it's not new.
In August 2021, the bind administration increased
assistance for the Supplemental Nutrition Assistance Program or
SNAP, which was originally known as food stamps. The benefits
will now increase by more than 25%, which means the average
benefits will rise from $121 to $157 per recipient every month.
Whether it's food deserts, whether it's malnutrition, we
have a serious problem in this country.
So why is food getting more expensive in the United States?
What does that mean for Americans and what can consumers
do about it?
That chart showed the average increase in food prices over
time, but we can also break it down even further.
In February 2017, one pound of 100% ground beef cost an average
of $3.55. Three years later in February 2020, right before
serious social distancing measures went into effect it
cost $4.03. It reached a peak of $5.33 in June 2020, but as the
pandemic restrictions were lifted, grocery costs stabilized
at least temporarily.
They began to creep back up slightly in January 2021, but
the prices haven't been increasing nearly as fast as
they were at the height of the pandemic.
My prediction is that prices of food are going to continue
increasing through this year. In 2022, I think prices are not
going to decline. But the rate of growth of food prices is
going to go back to normal. We are not going to see the highest
level of price increases.
It's not just the absolute cost that shows food is getting more
expensive. Businesses are getting creative about how to
pass on higher costs to customers.
There's a practice called shrink inflation. This is when
manufacturers decrease the amount of product in a package
while keeping the price the same.
Two Harvard Business School researchers trace the trend back
to the late 1980s. When they found that Chock full o'Nuts
reduced it's one pound 10 of coffee to 13 ounces in 1988. By
2004, it was down to 11.5 ounces.
What manufacturers don't want to do is scare off customers. So as
prices go up, they have three choices. One is to absorb the
cost and basically go out of business. That's not a very
sustainable model. Number two is pass along those increased
costs. Or, number three, reduce the size of the amount of
product that's in the package.
Downsizing the product while maintaining the same price is an
effective strategy for businesses to save money.
Consumers don't react the same way to sticker price increases
as they do to downsizing a product because it's not as
obvious.
Consumers do not do the math of you know how much I am paying
per ounce or per pound. So reducing tiny bit the size of
the the packaging will not affect very much.
Climate change has an effect on everything. It affects our
agriculture. It affects our livestock. It can create natural
events like floods and droughts over time. These are all things
that if we don't get in front of we may have a shortage of food
supply.
The United Nations Intergovernmental Panel on
Climate Change released a report in August 2021 that the UN
Secretary General described as a "code red for humanity." The
report repeatedly says that climate change threatens global
food security.
If you take a look at what's going on now with coffee, for
example, in Brazil - Brazil just can't produce because of the
rain as much coffee as we want to consume. So that means the
price of coffee is going to go up about 30%. We've got the
wildfires in California that are really destroying a lot of farms
and a lot of ranches. We've got major problems as it relates to
climate change and what's going on.
We talk about this tipping point as if it's something that's far
off in the future. But the reality is is that the actions
we have today create an effect tomorrow.
The pandemic wreaks havoc on global supply chains across
multiple sectors from computer chips to lumber to shipping
containers. The food production supply chain was no different.
Food supply chains depend on many different factors. The
process starts with the producers of food like
agricultural farmers growing crops such as soybeans, wheat
and corn. There are also dairy farmers and ranchers who raise
livestock.
The cost of feeding them the cost of keeping them hydrated,
all of that factors in and then the transportation. How do I get
corn from Iowa delivered to New York City. That has to go from
their silos to a truck delivered to someone to actually sell
that.
That means when the cost of food in one category rises, such as
corn, the cost of livestock that are fed corn gets more
expensive. If fuel prices rise, transportation costs rise,
making food more expensive overall.
There were transportation issues that were driving up the cost of
food before the pandemic.
We've got an aging truck driver workforce, and they're retiring,
they're not able to make as much money as they used to.
In the summer of 2019, the Federal Motor Carrier Safety
Administration created stricter rules for commercial truck
drivers. The rule changes put a limit on the number of hours
they could drive between breaks.
As a result of that they're making less money, they don't
get paid by the hour, they get paid by the trip. So if they
can't drive 20 hours straight, and they've got to take a break
after eight or nine hours, guess what happens. They make less
money.
The pandemic worse in these already existing issues. What
happened during the pandemic is frankly, a lot of the imported
and exported product, which comes by ship, which comes in
containers. Those containers were locked down wherever those
ships were, and in some cases, they're still locked down. So
we've got containers in all the wrong parts of the world that in
some cases have food rotting inside.
In the beginning of August 2021, container shipping rates from
China to the East Coast of the United States hit new highs with
a 40-foot box costing more than $20,000. In early March 2020,
that same service costs around $2,500. The pandemic triggered
more than just transportation issues. Early in the pandemic
meatpacking and other food factories struggled to keep
operations going as Covid continued to spread. At the end
of April 2020, former President Donald Trump invoked the Defense
Production Act in order to classify meatpacking plants as
critical infrastructure and keep them open. This was meant to be
a way to combat the stress coronavirus was placing on the
food supply chain.
The United Food and Commercial Workers International Union
released a report in late June 2020, that said 238 UFCW
frontline workers had died from Covid during the first wave of
the pandemic. In July 2020, the CDC had found that 9% of workers
at meat and poultry processing facilities across 14 states had
been diagnosed with COVID-19.
The problem that these factories whether it be a poultry factory
or frozen food factory, were built for efficiencies. They
weren't built for social distancing. We need better, more
efficient factories to be built. The idea of building one huge
meat processing plant and being able to supply the country from
it. That's antiquated.
Rising labor costs and the ongoing worker shortage also
caused food prices to spike during the pandemic.
Labor is just becoming more expensive. So we have seen in
the past few months that retailers, grocery stores,
restaurants, growers have to increase wages to attract
workers.
It's a combination of all these factors. I think it's very
difficult to say, you know, what did the pandemic do? What does
climate change do? What does transportation do? So, you know,
we've got to lump it all together, and we've got to solve
them all together.
When we think about the rising cost of food, one of the things
that is clear to us is that families can't accommodate it.
If you already have a really tight budget, if you're already
struggling, that's going to make it worse. And for some people
who were managing to hold it together and could basically
consider themselves foods secure, it pushes them into food
insecurity.
The US government has two different labels to describe
when Americans don't have enough food: Food insecurity and food
insufficiency. Put simply, food insufficiency is a more severe
form of food insecurity. The USDA considers a household food
insecure if they were at times unable to access adequate food
for at least one member of the household because they didn't
have enough money or other resources.
Food insecurity is measured in scales, a household can be
considered food insecure based on their low food intake, but it
can also take into account the quality of their diet. The US
government measures food insecurity levels with an annual
survey. According to the USDA, his latest household food
insecurity report, around 13.8 million households in the United
States were considered food insecure in 2020.
The government measures food insufficiency more frequently
than food insecurity with what's called the Census Household
Pulse Survey. The US government started collecting this data in
April 2020. This means there's real time data about the rates
of food insufficiency throughout most of the pandemic.
The survey asks respondents to characterize their access to
food within the last seven days. If they said that they sometimes
or often didn't have enough to eat, they are classified as food
insufficient.
At the end of April 2020, 9.8% of all US households qualified
as food insufficient. That number peaked in December 2020,
at 13.7%. As of August 2021, it's declined to 7.8%.
But not all households are affected equally. While white
and Asian households have followed the overall downward
trend, Black, Latino, and multiracial households have not
seen the same improvements.
This shows how much work really has to be done. It just makes me
so angry that something like that could be happening in
families purely because of racism.
Not much research has been done on the link between high food
prices and increased food insecurity in the US because the
cost of food is low as a proportion of total household
expenses, relative to other countries. One of the most
recent studies on the topic is from 2013. It found that local
food prices significantly affect food insecurity for households
at 200% or less of the federal poverty line. To put that in
perspective, this would be a family of four living in one of
the 48 contiguous states earning $47,100 a year or less.
well, when our body isn't getting the nutrients, it needs
to run as efficiently as possible, it's going to decorate
over time,
Food insecurity is very difficult, particularly for
mothers, and we see that as a coping mechanism, they'll often
make sure to feed their kids first. And so they'll be going
without. It causes mental health problems for people because it's
depressing if you can't feed yourself. And it's even more
depressing if you can't feed your kids.
What we're hearing is that this is just one of a multitude of
stressors faced by households in the past year. And it's really
compounded that stress for them in a way that I think we're
going to have to think very critically about how we
intervene upon food insecurity in a way that's multifaceted and
recognizes it as one of many social risks impacting health
outcomes for families.
policymakers and businesses do have options to help those
affected by rising food costs. One approach the government has
taken is to help lower income Americans afford food as costs
increase. There's general consensus among experts that
federal food programs are the primary policy defense against
food insecurity. SNAP is the largest federally run program.
Formerly referred to as "food stamps," the program provides
money for food insecure families with the goal of increasing
access to adequate amounts of healthy food.
These programs help families mitigate the rising costs, so
that they can afford to plan a dinner that has some fruits and
vegetables so that they can afford to have all the meals
that they should have and give their children all the meals
their children should have.
The 2018 Farm Bill directed the USDA to re-evaluate what is
called the Thifty Food Plan by 2022. This plan is what is used
to calculate the maximum SNAP benefits allowed.
The way that they calculated the benefits for SNAP really wasn't
working. There wasn't enough money there for people to buy
the food that they needed to buy in order to have a diet that was
consistent with the dietary guidelines.
This was the first time the plans had ever been re-evaluated
since they were created in the late 1970s.
And so from our perspective, since we work on the federal
food program, we think it's very important that people continue
to have access to SNAP and that it be adequate.
Rather than helping people gain access to food as prices
increase, there are methods that could potentially lower the cost
of food overall.
When it comes to climate change, we've got to change the way we
do business. The first step is developing new technologies that
can allow whether it's for indoor farming, whether it's
outdoor farming, to become more efficient.
New technologies can also help address rising labor costs,
personnel shortages and other supply chain issues.
Food supply chain needs to be better coordinated. Businesses
along the supply chain need to share more data. We need better
information to understand what are some of the forces that are
driving demand and prices.
Incorporating things like AI and machine learning, they're really
going to help forge more accurate predictive outcomes.
When you're using things like AI, you're using it to couple
with our human brain power to kind of quickly figure out what
are the problems? What are the worst case scenarios? And how do
we figure out ways to take those problems and turn them into
solutions?
There are also some options for consumers when it comes to
saving money at the store.
We've got to be better shoppers. We've got to look at the cost
per unit. We've got to look at the store brands. Most store
brands today are equal or better than a lot of the national
brands that are out there and they're less expensive.
Attention gets put on fresh produce as being very nutritious
and ideal. But in fact, there are less costly alternatives
that I always you know want to remind people out there's no
shame and relying on frozen food.
We can save money, there's no question about it, even as food
prices are going up. But we've got to be smarter about it.