In the past year, inflation swerved around grocery stores like a wobbly shopping cart, slamming into the meat department, milk, eggs and even toothpaste.
The increases have been felt by groceries, restaurants and others. The average price-per-pound of fresh vegetables shipped in December was 19 percent higher than a year earlier, and fresh fruit was up 10 percent from the previous year, according to the research firm NPD Group, which tracks food shipped to restaurants through major distributors such as US Foods and Sysco.
Produce is a “cart starter,” said John Ross, the chief executive of the Independent Grocers Alliance, a chain of grocery stores that operates in more than 30 countries. What that means is that grocery stores live or die by whether they are a good source of produce, so every store tries to hold those prices down for as long as possible, Ross said.
When inflation is at 2 or 3 percent, grocery stores have tools to shield shoppers from those increases, but when inflation gets over 5 or 6 percent, a retailer runs out of options.
“What that really means is intense pressure on lower- and middle-income consumers,” Ross said, “because those increases have to be passed on to them.”
The squeeze is not felt only at grocery stores, but also at food banks feeding the neediest Americans. For the Greater Boston Food Bank, bananas went from $10 per case to $12.30 in the past two weeks, said Catherine Drennan Lynn, a spokeswoman for the food bank. Apples are up 20 percent. Citrus is up 7 percent. Packaged salads were up 5 percent at the end of December. Lynn said even canned vegetables are up 20 percent.
She said that although the food bank hasn’t had to deal with any long-term shortfalls, 15 to 20 percent of inbound food deliveries have been delayed or gone missing altogether because of problems in the supply chain. “Clearly, we’re having to spend more on food across the board,” Lynn said.
Some of the reasons for higher produce prices are the same labor shortages, transportation problems, fuel-price increases and supply chain hiccups that have plagued other parts of commerce during the pandemic. But some culprits are new.
Import issues
During winter, the United States relies more heavily on imports from Mexico and South America, especially fruits. The Mexican minimum wage has almost doubled in the past four years. And on Jan. 1, it rose 22 percent. Increased wages add to production costs, which often pass upstream to wholesalers, retailers and consumers. And for items such as table grapes, which are shipped from Peru after California’s fall harvest has ended, the container rate a year ago was $5,000. It’s now $12,000, according to David Magaña, a senior analyst for RaboResearch Food & Agribusiness.
“Prices for table grapes have risen double digits in the past couple weeks,” he said. “That’s one commodity where transportation costs are having an impact.”
Another problem that is slowing produce imports, and thus making them more expensive, is a new agricultural inspection program at the Mexico-U.S. border “that caught people by surprise,” according to Michael Swanson, Wells Fargo’s chief agricultural economist. “Any time you slow down the throughput, you reduce availability; the net was it increased prices.”
Swanson said winter snow storms in many parts of the country also have slowed trucked deliveries of produce and increased prices.
Changing tastes
Demand for fruits high in vitamin C, vegetables high in antioxidants and items reverentially described as “superfoods” has exploded during the pandemic, Magaña said. Months of remote work led to what he called “the smoothie effect” — stuck at home, we wanted to whiz up something healthful and convenient, and some changes in consumption are sticking, he said.
For millennials and Gen Zers, who make up an increasingly large segment of grocery consumers, there is a “cult of fresh,” meaning a strong preference for fresh fruits and vegetables and an aversion to canned goods, Magaña said. For Florida oranges, which this year were the smallest crop since 1945, prices rose about 6 percent in January, according to the market research firm Nielsen. Younger generations are driving demand for fresh berries such as blueberries 52 weeks a year, which increases transportation costs for those items sourced from far-flung places when they are not in season domestically, Magaña said. In the last week of 2021, prices for conventional blueberries were 45 percent higher than the year before, according to USDA data analyzed by Agronometrics, a market research firm.
And something weird is happening with avocados, Magaña said. A year ago, the United States had record shipments of avocados coming from Mexico. This year, despite consistently high demand, shipments are more in line with the five-year average. There just aren’t enough to meet demand, which has driven prices higher. Avocados are 100 percent more expensive than they were a year ago, according to Magaña, now costing $50 per carton.
What is grown
Fertilizer accounts for about 15 percent of a farmer’s expenses. Fertilizer prices are up 300 percent in the past 12 months. Rising energy costs, particularly the price of natural gas, have elevated costs even more, according to Aaron Rutstein, the risk services director for the Americas for Atradius, a credit insurance company.
“That affects how much farmers plant,” he said. “And companies have decisions to make: Do we absorb these increases or lose market share?”
Abe Eshkenazi, the chief executive of the Association for Supply Chain Management, said the severity and duration of natural disasters has increased over the past 20 years, leading to changes in what, and how much, is planted.
Last summer’s protracted drought in California saw fewer farmers planting canning tomatoes and water-intensive crops such as melons. Limits on irrigation water and the occurrence of crop-wrecking floods prompt farmers to make conservative decisions about acreage planted, which can create imbalances between supply and demand or drive more imports.
Experts are still debating when these inflationary pressures may ease, but they agree it will be gradual.
“You’ll see inflation in a lot of categories moving in waves,” Rutstein said. “It didn’t start overnight, and it won’t get fixed overnight.”