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ply chain disruption This lack of investment brings an increase in
potential price pressure, which is exactly what is
The food industry is not immune to the supply playing out as it relates to food inflation right now.
chain issues impacting other industries either.
Not only does a lot of food like pork come Higher wages, more demand
from overseas producers, but so do many of
the materials like aluminum and cardboard Consumers are spending about 20% more on food
food manufacturers use in their packaging. For at grocery stores and in restaurants now compared
instance, “plastic is really difficult to get your to before the pandemic. But higher prices are the
hands on right now,” Harig noted. only reason for the increased spending. “There’s
just more food buying that’s happening overall,”
He says labor shortages, coupled with issues like says Lusk.
tariffs and product scarcity, is leading to higher
food prices. Meat, in particular, has seen a major Part of that can be traced back to the beginning of
spike in prices, with beef up 22%, pork up about the pandemic, when consumers “pantry loaded” as
16%, and chicken up about 13%. lockdowns went into effect. Lusk notes, however,
that people haven’t really changed their food
Jayson Lusk, Head of the Department of buying habits since then.
Agricultural Economics at Purdue University,
added that, to catch up on the backlog inventory He says stimulus checks, higher wages to attract
from last year’s meat-packing plant shutdowns, and retain workers, and other factors mean there
workers have had to pick up weekend shifts. is both more money in the economy overall and
more money for people to spend individually.
“They’re running extra shifts on Saturdays [and] On the one hand, the increase in money supply
Sundays, and people aren't willing to do that decreases the value of each dollar, leading to
for free,” said Lusk, noting that’s where wage higher prices to make up the difference.
premiums and disaster payments come into play.
“That’s what it took and is taking to keep workers And, on the other
in those plants running close to full capacity.” hand, it’s simple
economics — “if
The energy crisis demand for food is
increasing, that’s going
A confluence of factors, from extreme weather to pull up prices.”
conditions to increased demand, is causing a
national energy crisis of sorts. Oil prices are
currently at their highest level since 2014, while
natural gas prices have nearly doubled.
What does that have to do with food? Well,
energy feeds into the operating costs for food
manufacturers and producers. Everything from
fertilizer to harvesting milk from cows has an
energy component.
Dean Foreman, chief economist at the American
Petroleum Institute estimates that energy could
account for between 20% and 30% of absolute
agriculture costs. It used to be that energy
was “a bit of a relief valve for rising prices and
expenditures of food, education and health care,”
says Foreman. But not anymore.
“We've had a big drop-off in capital expenditures
and investment,” he says. “CapEx directly
correlates to the amount of drilling activity, and
hence supply that's likely to come.”
SOUTH CHINA BUSINESS JOURNAL 20
potential price pressure, which is exactly what is
The food industry is not immune to the supply playing out as it relates to food inflation right now.
chain issues impacting other industries either.
Not only does a lot of food like pork come Higher wages, more demand
from overseas producers, but so do many of
the materials like aluminum and cardboard Consumers are spending about 20% more on food
food manufacturers use in their packaging. For at grocery stores and in restaurants now compared
instance, “plastic is really difficult to get your to before the pandemic. But higher prices are the
hands on right now,” Harig noted. only reason for the increased spending. “There’s
just more food buying that’s happening overall,”
He says labor shortages, coupled with issues like says Lusk.
tariffs and product scarcity, is leading to higher
food prices. Meat, in particular, has seen a major Part of that can be traced back to the beginning of
spike in prices, with beef up 22%, pork up about the pandemic, when consumers “pantry loaded” as
16%, and chicken up about 13%. lockdowns went into effect. Lusk notes, however,
that people haven’t really changed their food
Jayson Lusk, Head of the Department of buying habits since then.
Agricultural Economics at Purdue University,
added that, to catch up on the backlog inventory He says stimulus checks, higher wages to attract
from last year’s meat-packing plant shutdowns, and retain workers, and other factors mean there
workers have had to pick up weekend shifts. is both more money in the economy overall and
more money for people to spend individually.
“They’re running extra shifts on Saturdays [and] On the one hand, the increase in money supply
Sundays, and people aren't willing to do that decreases the value of each dollar, leading to
for free,” said Lusk, noting that’s where wage higher prices to make up the difference.
premiums and disaster payments come into play.
“That’s what it took and is taking to keep workers And, on the other
in those plants running close to full capacity.” hand, it’s simple
economics — “if
The energy crisis demand for food is
increasing, that’s going
A confluence of factors, from extreme weather to pull up prices.”
conditions to increased demand, is causing a
national energy crisis of sorts. Oil prices are
currently at their highest level since 2014, while
natural gas prices have nearly doubled.
What does that have to do with food? Well,
energy feeds into the operating costs for food
manufacturers and producers. Everything from
fertilizer to harvesting milk from cows has an
energy component.
Dean Foreman, chief economist at the American
Petroleum Institute estimates that energy could
account for between 20% and 30% of absolute
agriculture costs. It used to be that energy
was “a bit of a relief valve for rising prices and
expenditures of food, education and health care,”
says Foreman. But not anymore.
“We've had a big drop-off in capital expenditures
and investment,” he says. “CapEx directly
correlates to the amount of drilling activity, and
hence supply that's likely to come.”
SOUTH CHINA BUSINESS JOURNAL 20
