Why Food Getting More Expensive In Us Market
Take a look at this chart. Itshows the cost of food in the U.S. steadily rising over thepast five years. The price increases have beenmostly driven by supply related factors. It has been like aperfect storm. Probably the number one reasonhas to do with climate change. Adverse weather in majorproduction is that out in Argentina, Brazil, California,or excess rains in some parts of Europe and China. So MotherNature is not working in favor of food production. We've got a huge transportationproblem. Labor in general is becomingmore expensive. These rising prices can haveserious consequences.
Food insecurity, particularly,it's truly a wicked problem, a problem that has much nuance toit and is multifaceted. Disparities have always existedin terms of access to food. And so even before Covid, there were35 million Americans who lived in households that werestruggling to put food on the table. So it's not new. In August 2021, the bindadministration increased assistance for the SupplementalNutrition Assistance Program or SNAP, which was originally knownas food stamps. The benefits will now increase by more than25%, which means the average benefits will rise from $121 to$157 per recipient every month. Whether it's food deserts,whether it's malnutrition, we have a serious problem in thiscountry.
Why Food Getting More Expensive-
So why is food getting moreexpensive in the United States? What does that mean forAmericans and what can consumers do about it? That chart showed the averageincrease in food prices over time, but we can also break itdown even further. In February 2017, one pound of100% ground beef cost an average of $3.55. Three years later inFebruary 2020, right before serious social distancingmeasures went into effect it cost $4.03. It reached a peak of$5.33 in June 2020, but as the pandemic restrictions werelifted, grocery costs stabilized at least temporarily.
They began to creep back upslightly in January 2021, but the prices haven't beenincreasing nearly as fast as they were at the height of thepandemic. My prediction is that prices offood are going to continue increasing through this year. In2022, I think prices are not going to decline. But the rateof growth of food prices is going to go back to normal. Weare not going to see the highest level of price increases. It's not just the absolute costthat shows food is getting more expensive. Businesses aregetting creative about how to pass on higher costs tocustomers. There's a practice called shrinkinflation. This is when manufacturers decrease theamount of product in a package while keeping the price thesame. Two Harvard Business Schoolresearchers trace the trend back to the late 1980s. When theyfound that Chock full o'Nuts reduced it's one pound 10 ofcoffee to 13 ounces in 1988. By 2004, it was down to 11.5ounces. What manufacturers don't want todo is scare off customers. So as prices go up, they have threechoices. One is to absorb the cost and basically go out ofbusiness. That's not a very sustainable model. Number two ispass along those increased costs.
Or, number three, reducethe size of the amount of product that's in the package. Downsizing the product whilemaintaining the same price is an effective strategy forbusinesses to save money. Consumers don't react the sameway to sticker price increases as they do to downsizing aproduct because it's not as obvious. Consumers do not do the math ofyou know how much I am paying per ounce or per pound. Soreducing tiny bit the size of the the packaging will notaffect very much. Climate change has an effect oneverything. It affects our agriculture. It affects ourlivestock. It can create natural events like floods and droughtsover time. These are all things that if we don't get in front ofwe may have a shortage of food supply. The United NationsIntergovernmental Panel on Climate Change released a reportin August 2021 that the UN Secretary General described as a"code red for humanity.
The report repeatedly says thatclimate change threatens global food security. If you take a look at what'sgoing on now with coffee, for example, in Brazil - Brazil justcan't produce because of the rain as much coffee as we wantto consume. So that means the price of coffee is going to goup about 30%. We've got the wildfires in California that arereally destroying a lot of farms and a lot of ranches. We've gotmajor problems as it relates to climate change and what's goingon. We talk about this tipping pointas if it's something that's far off in the future. But thereality is is that the actions we have today create an effecttomorrow. The pandemic wreaks havoc onglobal supply chains across multiple sectors from computerchips to lumber to shipping containers. The food productionsupply chain was no different. Food supply chains depend onmany different factors. The process starts with theproducers of food like agricultural farmers growingcrops such as soybeans, wheat and corn.
Why Getting More Expensive food Market-
There are also dairyfarmers and ranchers who raise livestock. The cost of feeding them thecost of keeping them hydrated, all of that factors in and thenthe transportation. How do I get corn from Iowa delivered to NewYork City. That has to go from their silos to a truck deliveredto someone to actually sell that. That means when the cost of foodin one category rises, such as corn, the cost of livestock thatare fed corn gets more expensive. If fuel prices rise,transportation costs rise, making food more expensiveoverall. There were transportation issuesthat were driving up the cost of food before the pandemic. We've got an aging truck driverworkforce, and they're retiring, they're not able to make as muchmoney as they used to. In the summer of 2019, theFederal Motor Carrier Safety Administration created stricterrules for commercial truck drivers. The rule changes put alimit on the number of hours they could drive between breaks.
As a result of that they'remaking less money, they don't get paid by the hour, they getpaid by the trip. So if they can't drive 20 hours straight,and they've got to take a break after eight or nine hours, guesswhat happens. They make less money. The pandemic worse in thesealready existing issues. What happened during the pandemic isfrankly, a lot of the imported and exported product, whichcomes by ship, which comes in containers. Those containerswere locked down wherever those ships were, and in some cases,they're still locked down. So we've got containers in all thewrong parts of the world that in some cases have food rottinginside. In the beginning of August 2021,container shipping rates from China to the East Coast of theUnited States hit new highs with a 40-foot box costing more than$20,000. In early March 2020, that same service costs around$2,500. The pandemic triggered more than just transportationissues.
Early in the pandemic meatpacking and other foodfactories struggled to keep operations going as Covidcontinued to spread. At the end of April 2020, former PresidentDonald Trump invoked the Defense Production Act in order toclassify meatpacking plants as critical infrastructure and keepthem open.
This was meant to be a way to combat the stresscoronavirus was placing on the food supply chain. The United Food and CommercialWorkers International Union released a report in late June2020, that said 238 UFCW frontline workers had died fromCovid during the first wave of the pandemic. In July 2020, theCDC had found that 9% of workers at meat and poultry processingfacilities across 14 states had been diagnosed with COVID-19. The problem that these factorieswhether it be a poultry factory or frozen food factory, werebuilt for efficiencies. They weren't built for socialdistancing. We need better, more efficient factories to be built.The idea of building one huge meat processing plant and beingable to supply the country from it. That's antiquated. Rising labor costs and theongoing worker shortage also caused food prices to spikeduring the pandemic. Labor is just becoming moreexpensive.
So we have seen in the past few months thatretailers, grocery stores, restaurants, growers have toincrease wages to attract workers. It's a combination of all thesefactors. I think it's very difficult to say, you know, whatdid the pandemic do? What does climate change do? What doestransportation do? So, you know, we've got to lump it alltogether, and we've got to solve them all together. When we think about the risingcost of food, one of the things that is clear to us is thatfamilies can't accommodate it. If you already have a reallytight budget, if you're already struggling, that's going to makeit worse. And for some people who were managing to hold ittogether and could basically consider themselves foodssecure, it pushes them into food insecurity. The US government has twodifferent labels to describe when Americans don't have enoughfood: Food insecurity and food insufficiency. Put simply, foodinsufficiency is a more severe form of food insecurity. TheUSDA considers a household food insecure if they were at timesunable to access adequate food for at least one member of thehousehold because they didn't have enough money or otherresources. Food insecurity is measured inscales, a household can be considered food insecure basedon their low food intake, but it can also take into account thequality of their diet. The US government measures foodinsecurity levels with an annual survey. According to the USDA,his latest household food insecurity report, around 13.8million households in the United States were considered foodinsecure in 2020. The government measures foodinsufficiency more frequently than food insecurity with what'scalled the Census Household Pulse Survey. The US governmentstarted collecting this data in April 2020. This means there'sreal time data about the rates of food insufficiency throughoutmost of the pandemic. The survey asks respondents tocharacterize their access to food within the last seven days.If they said that they sometimes or often didn't have enough toeat, they are classified as food insufficient. At the end of April 2020, 9.8%of all US households qualified as food insufficient.
Food Getting More Expensive problem-
Thatnumber peaked in December 2020, at 13.7%. As of August 2021,it's declined to 7.8%. But not all households areaffected equally. While white and Asian households havefollowed the overall downward trend, Black, Latino, andmultiracial households have not seen the same improvements. This shows how much work reallyhas to be done. It just makes me so angry that something likethat could be happening in families purely because ofracism.
Not much research has been doneon the link between high food prices and increased foodinsecurity in the US because the cost of food is low as aproportion of total household expenses, relative to othercountries. One of the most recent studies on the topic isfrom 2013. It found that local food prices significantly affectfood insecurity for households at 200% or less of the federalpoverty line. To put that in perspective, this would be afamily of four living in one of the 48 contiguous states earning$47,100 a year or less. well, when our body isn'tgetting the nutrients, it needs to run as efficiently aspossible, it's going to decorate over time, Food insecurity is verydifficult, particularly for mothers, and we see that as acoping mechanism, they'll often make sure to feed their kidsfirst. And so they'll be going without. It causes mental healthproblems for people because it's depressing if you can't feedyourself. And it's even more depressing if you can't feedyour kids. What we're hearing is that thisis just one of a multitude of stressors faced by households inthe past year. And it's really compounded that stress for themin a way that I think we're going to have to think verycritically about how we intervene upon food insecurityin a way that's multifaceted and recognizes it as one of manysocial risks impacting health outcomes for families. policymakers and businesses dohave options to help those affected by rising food costs.One approach the government has taken is to help lower incomeAmericans afford food as costs increase.
There's generalconsensus among experts that federal food programs are theprimary policy defense against food insecurity. SNAP is thelargest federally run program. Formerly referred to as "foodstamps," the program provides money for food insecure familieswith the goal of increasing access to adequate amounts ofhealthy food. These programs help familiesmitigate the rising costs, so that they can afford to plan adinner that has some fruits and vegetables so that they canafford to have all the meals that they should have and givetheir children all the meals their children should have. The 2018 Farm Bill directed theUSDA to re-evaluate what is called the Thifty Food Plan by2022. This plan is what is used to calculate the maximum SNAPbenefits allowed. The way that they calculated thebenefits for SNAP really wasn't working. There wasn't enoughmoney there for people to buy the food that they needed to buyin order to have a diet that was consistent with the dietaryguidelines. This was the first time theplans had ever been re-evaluated since they were created in thelate 1970s. And so from our perspective,since we work on the federal food program, we think it's veryimportant that people continue to have access to SNAP and thatit be adequate. Rather than helping people gainaccess to food as prices increase, there are methods thatcould potentially lower the cost of food overall. When it comes to climate change,we've got to change the way we do business. The first step isdeveloping new technologies that can allow whether it's forindoor farming, whether it's outdoor farming, to become moreefficient. New technologies can also helpaddress rising labor costs, personnel shortages and othersupply chain issues. Food supply chain needs to bebetter coordinated.
Businesses along the supply chain need toshare more data. We need better information to understand whatare some of the forces that are driving demand and prices. Incorporating things like AI andmachine learning, they're really going to help forge moreaccurate predictive outcomes. When you're using things likeAI, you're using it to couple with our human brain power tokind of quickly figure out what are the problems? What are theworst case scenarios? And how do we figure out ways to take thoseproblems and turn them into solutions.
There are also some options forconsumers when it comes to saving money at the store. We've got to be better shoppers.We've got to look at the cost per unit. We've got to look atthe store brands. Most store brands today are equal or betterthan a lot of the national brands that are out there andthey're less expensive. Attention gets put on freshproduce as being very nutritious and ideal. But in fact, thereare less costly alternatives that I always you know want toremind people out there's no shame and relying on frozenfood. We can save money, there's noquestion about it, even as food prices are going up. But we'vegot to be smarter about it.