(OPINION) ETH – Food prices in July were up 31 percent from the same month in 2020, according to the United Nations Food and Agriculture Organization. This rise is fueled by supply chain disruption and extreme weather conditions.
Central banks disregard food and fuel inflation when setting policies as they are the most volatile categories in the typical basket of consumer goods and services. However, these are the first things that come to mind when ordinary people think about inflation. Shang-Jin Wei, a professor of finance and economics at Columbia Business School, noted that central banks are underestimating the change to take more drastic measures that they themselves are predicting.
Prices for chicken and other proteins have been inflated in the U.S. due to labor shortages at processing plants. Strong demand from at-home cooks is a factor, but restaurant chains are competing in chicken wars. At the same time, the supply has been constrained as farmers scramble to rebuild their flocks – many of which were decimated by winter storms in February.
Middle-class families in the U.S. are not going hungry as food prices rise, but millions of individuals are. Before the pandemic, about 35 million Americans were already considered food insecure, or lack consistent access to enough food for all the members of a household.
Amidst the huge spike of joblessness brought about by the COVID-19 recession, the number jumped to 45 million or more than 13 percent of the population. (Related: Surging food prices force restaurants to increase cost of menu items.) Grocery prices are trending upward the entire year, and steady price increases may be the new normal.
Phil Lempert, an analyst and food trends expert, said that people are going to continue seeing price increases in the next two years or so. In the decade before the pandemic, year-over-year price increases have been around 1 percent for food at home. Meaning, July’s 2.6 percent increase is more than double of what people are accustomed to. READ MORE