Economic Indicators: Food Inflation
Have you ever wondered why meat products were so expensive during COVID-19? It was probably due to the outbreak of COVID-19 in many of the U.S. meat processing facilities, leading to the need to import more meat products, the U.S. Bureau of Labor Statistics said. As a result, import meat prices grew drastically in May 2020. As the U.S. continued to feel the effects of the pandemic, high import prices and low inventory contributed to the short supply and high prices of meat products you probably saw as you walked down the aisle of your local grocery store.
The sharp increase in food prices, also known as food inflation, during the height of the pandemic are showing us the impact on both producers and consumers during this time. As the input prices increased and the supply of many goods decreased, the relative price of these goods increased. As people were quarantined at home, the demand for food at home increased, while the demand for food away from home decreased. However, as restrictions loosened and businesses and restaurants opened up again, the demand for food increased and food prices began to rise as a result.
However, the uptick in food prices in July 2021 is interesting. There was a rise in prices by 3.40% in comparison to July 2020. This could be due to a variety of factors. One is the high cost of input resources, Food Business News said. These costs are due to a short supply of raw materials, intermediate goods, and a labor shortage, which contributes to the higher costs of producing, transporting, and packaging goods. As the food manufacturing industry recovers from the effects of COVID-19, high prices of inputs cause prices of final goods to be higher than what we have seen previously.
By the end of the quarter, food inflation is expected to be 3.50%, which is significantly higher than normal, Trading Economics said. This is telling us that prices will continue to increase, probably due to the effects of the pandemic, including the Delta variant causing more restrictions and limiting travel. As people continue to work from home, the demand for food at home is high while producers are still addressing the issues with input costs. Food inflation in 2022 is anticipated to be around 2.30% and 2.10% in 2023. This projection might stem from the hope that a swift recovery from the pandemic will increase demand and supply, adjusting prices closer to the mean.
