Food inflation persists as drought batters produce crops

Dive Brief:

• Food-at-home prices have increased 13% during the past year, easing slightly from the 13.5% clip posted last month, according to the Bureau of Labor Statistics’ Consumer Price Index for September. Still, grocery items increased 0.7% in September from August, extending a string of monthly increases that began early last year.
• The six major grocery store food categories tracked by the BLS all saw price increases in September. Fruit and vegetable prices ticked up 1.6%, behind steep jumps for lettuce (6.8%) and apples (5%). 
• While inflation abated in other categories like energy during September, the continued increase in the price of grocery items — caused in part by drought in some growing regions and ongoing grain backlogs in Ukraine — indicated that consumers’ wallets will continue to be stretched thin for the time being.

Dive Insight:

With this month’s inflation numbers being higher than analysts expected, some have argued that the persistence of rising prices for commodities like food is pointing toward an eventual recession.

Rising produce prices can be attributed to weather woes and a lack of rainfall in the western U.S.

It has led to a poor growing season for lettuce in Arizona, which produces most of the commodity during the winter for the country. Apples, which are grown heavily in the Northwest, are feeling the effects of the drought, fueled by high temperatures and little rainfall. Some farmers in Washington state told Fox Business this week that their supply of the fruit dropped by 60% this year, indicating that fewer apples could be available on the shelves in the coming months.

Along with produce, another category seeing prices increase is cereal and bakery products — which surged 16.2% during the past year — amid an ongoing wheat shortage as the war in Ukraine continues and Russia appears unwilling to follow through on its deal to open the country’s shipping ports.

At the FDA’s National Food Policy conference this week in Washington, D.C., David Ortega, an associate professor at Michigan State University, said a drier year for plants and California’s four-year drought are impacting crops like tomatoes. This, he said, could impact the price of tomato sauces and canned tomatoes in the future. He noted, though, that a decreasing inflation rate would not indicate that food is becoming more affordable for consumers.

“If you start to see the inflation rate decrease, it doesn’t mean that prices are going to get cheaper,” Ortega said. “It just means that they’re not going to be rising as fast. And so it’s really going to take getting these factors resolved before we start to see some relief for consumers.”

Dasha Shor, a global food analyst at Mintel, presented statistics at the conference showing 77% of consumers surveyed are worried about inflation and 58% are cutting down on spending like travel and restaurants.