Food-at-home prices jump 10% as supply chain and Ukraine war pressures mount

Diving brief:

  • The consumer price index for food at home has risen 10% in the past 12 months – the biggest 12-month increase since March 1981, according to data from the Consumer Price Index of the US Bureau of Labor Statistics released this week. Flour, meats, milk, and fats and oils saw some of the biggest year-over-year price increases.
  • On a month-to-month basis, take-home food prices rose 1.5%. Butter saw the largest monthly price increase among groceries, rising 6% in March, nearly double the rate of increase the previous month. Over the past 12 months, the butter price index has increased by 12.5%.
  • Butter prices have been on a strong upward trend since the beginning of the year, due to various factors such as shrinking dairy herds, labor shortages in manufacturing plants and rising packaging costs. The war in Ukraine, meanwhile, has put pressure on food products such as grains and oils.

Overview of the dive:

The increase in the price of butter in March is the result of a series of triggering factors. A USDA report this month said a tighter supply of cream on northeast farms is causing production to slow, contributing to higher butter prices. The government agency said demand for butter remains high in retail and foodservice stores.

Higher butter prices are reflected in recent sales results for dairy manufacturers. In March, butter giant Land O’Lakes said the co-op had hit record net sales of $16 billion in 2021, with retail dairy volumes above pre-pandemic levels. However, dairy revenues fell below previous years as supply chain issues led to higher transportation and sorting costs.

The CPI for fats and oils rose 14.9% over the past 12 months and 2.9% in March, boosted by higher prices for butter, margarine, salad dressing and Peanut Butter. Oil prices soared during the Russian invasion of Ukraine. Together, the two countries produce 80% of the world’s sunflower oil exports. The Food and Agriculture Organization of the United Nations said its global vegetable oil index rose 17.1% from February to a record high in March, based on rising costs. sunflower, palm, soy and rapeseed oils.

Flour and prepared flour mixes saw a 14.2% year-over-year increase, according to BLS data, with a 2.2% increase in March. Wells Fargo agricultural economist Michael Swanson told Food Dive in a recent interview that wheat prices rose globally due to supply shortages from Ukraine and Russia, which are responsible for 29% of world wheat exports. US wheat, Swanson said, was able to make up the shortfall, but it is a premium product and tends to be priced higher, which has helped push up wheat prices. Bad weather also continues to be a factor: according to the FAO, world wheat prices soared 19.7% in March due to worrying harvest conditions in the United States.

The Citrus Price Index, which saw the biggest rise in the monthly food-at-home price index in February at 6.8%, eased somewhat with a price increase of 3.2% in March.

The inflationary trend is not expected to stop anytime soon. In an emailed statement, Leslie Sarasin, president and CEO of the Food Industry Association, pointed to forecasts by the USDA Economic Research Service that door-to-door food prices are expected to rise between 3% and 4% in 2022. Demand will continue to drive price increases, with average weekly household spending currently standing at $148, up from a pre-pandemic average of $113 per week, Sarasin said.

“Grocery prices continue to show some volatility, especially since consumer demand hasn’t waned,” Sarasin said.

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