More American consumers ate at home last year because of the pandemic, contributing to the biggest annual increase in food prices at home in nine years.
Food costs are expected to increase further in 2021. “This year, food price inflation is certainly a concern,” said Isaac Olvera, chief economist with ArrowStream, a supply chain technology company for the food service industry.
Food prices in 2020 are up 3.9% from 2019, according to the US Bureau of Labor Statistics (BLS). Prices are for the food category at home, where the buyer is also a consumer rose at the same rate of 3.9% last year, the biggest annual increase since 2011.
That US Department of Agriculture estimates a 2% to 3% increase in food prices this year, compared to a 20-year historical average increase of 2.4%. Prices for meals outside the home – served by restaurants and other services – are also expected to increase by 2% to 3%, while prices for meals at home are expected to increase by 1% to 2%, the government agency said.
Food inflation is almost double the Federal Reserve’s inflation target, said Sal Gilbertie, president and chief investment officer at Teucrium Trading. Meat and grains, and grain products like bread, represent “a much higher overall rate of inflation,” he said. BLS data revealed an unadjusted 5.5% increase in the meat expenditure category from January 2020 to January 2021.
Gilbertie attributed the higher rate of inflation to rising grain prices and “the failure and rebuilding of China’s pig herd.” The Chinese have to import large quantities of animal protein to make up for the shortage of meat from pig herds hit by African swine fever. Then China imports grain to feed the pigs as it works to rebuild their numbers, he said.
prices are higher this time of year. Last year, corn futures rose nearly 25%, wheat
up nearly 15% and soybeans by more than 37%.
China was behind most of the increase in corn and soybeans, Olvera said. Brazil and the US supplied most of the beans to China and last year. Brazil is basically running out of exportable soybeans and is actually importing it.
Among the biggest reasons for the increase in food costs last year, however, were disruptions to packing factories caused by workers suffering from the coronavirus that closed many meat processing facilities, Olvera said. “Packing factories are closed and production of beef, pork and poultry is hampered,” he said, as consumers flock to grocery stores to buy supplies.
has increased by about 20%, while feeder cattle
or livestock sent to the feedlot, experienced a modest decline.
Olvera said the increase in the number of skinny pigs this year was partly due to the increase in feed costs. “Many traders are betting on pork supply and export expectations,” and the market suggests that “domestic pork availability may be tight until mid-year.”
The price of feeder cattle is under pressure due to the increase in corn prices. Because maize is used in feed, ranchers are more likely to lose money on fattening cows, Olvera said. There could be less livestock and a tighter meat supply in the second half of this year, he said, adding that he continued to view beef demand as still strong.
The reopening of restaurants will lead to inflation, as wholesale food supplies will be reallocated between retail and food services, Olvera said, although it is not known how active consumers will return to restaurants in a post-pandemic world.
In the long term, “we believe that consumers have changed and this change will force… the food service industry to become more agile,” he said.