Food Inflation Widespread
Food prices are spiking around the world, and inflation for everything from gasoline to haircuts continues to eat into consumers’ disposable income. And that means consumers will need to make choices
Betty Berning, analyst with the Daily Dairy Report, said, “with inflation accelerating and probably lasting longer than the Federal Reserve originally thought, consumers will have to make their food dollars stretch further.”
The U.S. Consumer Price Index (CPI) for all items surged 6.2% in October from prior-year levels, the highest year-over-year gain since 1990, according to the U.S. Bureau of Labor Statistics. The CPI for food fared better, up 5.3%, but the energy CPI jumped a startling 30% over October 2020 levels, with the index for energy commodities, such as gasoline and fuel oils, climbing nearly 50% and 60%, respectively.
“Rising fuel costs are affecting farmers, and along with the increased cost of other inputs, are effectively shrinking on-farm margins,” Berning noted. “An while dairy product prices are on the rise, increases in Class III and Class IV milk markets might not be enough to offset rising expenses, which will squeeze on-farm margins even further.”
Data from the U.S. Bureau of Labor Statistics show that retail prices for dairy products increased at a slower rate than food in general, with the CPI for dairy and related products up 1.8% in October 2021 compared to the previous year. For instance, butter at retail cost $2.52/lb., up a modest 0.9% since October 2020, while the price of cheese at $2.42/lb. was a penny less than it was in 2020.
“The cheese price suggests that retailers increased prices in 2020, when wholesale prices hit new highs, and have maintained those highs since then,” Berning said. “And the cost for whole milk in October soared 8% on an annual basis to $3.66 per gallon, the highest price since 2015.”
Globally, Berning said, food prices have risen even faster. The Food and Agriculture Organization’s Food Price Index surged 31.3% in October year over year to its highest level since 2011. The vegetable oil index set a record high, soaring 16.3% from September levels, as prices for palm, rapeseed, sunflower, and canola oil all climbed.
Since October 2020, the FPI for dairy has climbed 16.2% due to rising butter and milk powder prices spurred by strong buyer demand and tightening or lower-than-expected milk supplies from major dairy exporters, Berning notes, adding that rising prices could have an impact on dairy demand going forward.
“In the developed world, where diets are rich in animal protein, some consumers could switch to cheaper options like dairy, but for the poor and many consumers in the developing world, where carbohydrates are staples and animal proteins are luxuries, people could cut back on or opt out of dairy entirely for less-expensive fare like pasta, rice, and beans,” Berning said.
