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Food Inflation | Everything You Need to Be Ready For in 2021

July 22, 2021 8 min read

food inflation

It took 16 months after the world shut down for us to begin to see the free market fluctuations settle into a steady positive incline.

Unemployment is down, the stock market is up, and businesses are reopening to consumers who have money to spend.

Sounds pretty pleasant, all in all.

But, something isn’t right.

With the economy starting to return to optimistic normality, why the heck are we still seeing the price of food climbing?

I don’t know about you, but I’ve noticed spending $100 on food doesn’t fill my grocery cart like it used to.

So, I wanted to understand why inflation is targeting our food industry so critically these days, despite our economy bouncing back.

After looking at the bigger picture, I believe I know what we can anticipate from the US food inflation rates and how we can prepare ourselves to get ahead of the flood inflation forecast (2021).

The Pandemic Planted the Seeds for Food Inflation

food inflation being felt in stores

By April 2021, the world was at a dead stop to deal with the dreaded new virus.

A few weeks prior, we were all living life normally and being promised this was nothing to worry about.

And so, the majority of people carried on as usual. People commuted to work, kids went to school, and farmers readied their crops for another harvest season.

But by April, the world had changed.

Life had changed.

The world’s economy was closing the doors on businesses, and the mass circulation of commerce came to a halt.

But, America’s fields don’t stop growing crops when stores stopped opening their doors. As a result, the agricultural industry would soon be catalyzed into experiencing a level of loss and waste not seen in over a century.

“The Covid-19 pandemic has created massive disruptions in the food system, from farm to fork. In some cases, we have observed and experienced severe food shortages. In others, food cannot reach end consumers and is ultimately wasted. Food waste is not new or novel in our current food system; however, images and reports of whole fields being plowed under and millions of gallons of milk being dumped during a time of such economic hardship and increased food insecurity raises questions about how Covid-19 has impacted food waste along the supply chain.” - Ellison, B. and M. Kalaitzandonakes. "Food Waste and Covid-19: Impacts along the Supply Chain." farmdoc daily (10):164, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, September 10, 2020.

Food Inflation on Produce 

Produce Farmers across America were forced to expel their resources almost entirely.

Depending on the crop, only a fortunate few could fall back on cover cropping by reburying their crops to return nutrients to the soil.

But even they would find disruptions come to the next crop rotation.

For months this occurred. This period of loss and waste would plant the seeds of food inflation we now see today on our fresh produce.

Food Inflation on Cattle

cattle food inflation

A similar situation would occur with our poultry and cattle industries. With schools and dairy-centric retailers like coffee shops closing their doors, an excessive amount of dairy must be purged.

Unfortunately, cows were still producing milk, and the cost to nourish them was beginning to soar under the declining availability of grain and feed.

With only a fraction of their supply finding its way onto store shelves, the upkeep on cattle ranches drove many into bankruptcy. (The tightened restrictions involving shipping and exports would play a role in every industry here, but we’ll get to that later.)

Food Inflation on Poultry

The poultry industry wasn’t fairing much better. Sure they weren’t having as difficult of a time finding buyers compared to the cowpunchers.

The versatility of poultry and our reliance on it preserved high demand, but they did run into complications with their industry middlemen.

Meat processing plants, which typically operate at high capacity in close quarters, were experiencing massive factory-wide outbreaks of coronavirus. Reduced labor and slower output at this stage of the supply chain threatened poultry farms with quickly going under.

As a preliminary measure to prevent rampant avian influenza cases from occurring or slow it spreading further, euthanizing large quantities of their birds became the only suitable option.

Chicken Shortage of 2021

chicken shortage

This humanely-muddled approach to prevention isn’t unprecedented. An avian influenza outbreak in 2015 led to the euthanization of over 31 million chickens in Iowa alone. But, statistical rates of animal euthanization around the start of the pandemic have been strangely underreported. Before the end of April (2020), Allen Harem, a poultry processor, announced plans to successfully euthanize over 2 million chickens at several locations in Delaware and Maryland alone.

Major poultry producers across the nation were exterminating resources rapidly to get in front of the oncoming livestock health risks and financial ruin.

Statistical estimations range the national rate of poultry euthanization upwards of 40% during the first two months of the pandemic, with a leisure rate of recovery to follow.

food inflation on chickens

Statistical euthanization and recovery rates for pork and cattle can be found in the links provided as well.

Jumping forward to the modern-day and we can see the results of their valiant efforts to best control last year’s calamity.

Stores are (mostly) stocked on fresh produce and proteins, and processing plants are back to operating at total capacity, and the livestock populations are slowly approaching adequate numbers.

Unfortunately, however, despite all this good news, some of these industries’ attempts to recoup their losses threaten us with fiscal whiplash. And taking a look behind the curtain shows us they are barely keeping up with appearances.

Food Inflation Raises Chickens

food inflation on chicken

There was a promise of optimism when select trade regulations were relaxed last summer to supply “egg breakers” (service industry workers) with sufficient poultry supplies as the economy began to reopen.

But, it wasn’t quite enough to counterbalance the insurmountable losses suffered from the recent exterminations and purging. The collection we see provided to retailers today is barely keeping up with the appearance of being “well-stocked.”

After eliminating such large quantities of resources for months, every industry is rushing to meet the demand needed to reopen the economy fully.

Because they are now constantly riding the line of not producing enough supply to meet demand… we have to ask. To what extent will we see shortages and the effects of cost-push inflation on the food we buy?

Is Food Inflation Necessary? Why Is it Happening Now?

why is food inflation happening?

There are several different types of inflation, and food inflation operates the same way. Rising costs of food inflation typically occur when there is not enough supply to meet the demand of a product.

It also happens when the production expenses of variable costs surpass the incoming revenue generated by what the product’s current market price is set at.

Three general reasons most probably cause the extreme Cost-Push Inflation we see today at the grocery store:

Food Inflation Reason #1

cows during food inflation

The produce and meat industry is attempting to pump the brakes on public demand by raising the cost of their products until only the highest bidders can afford them.

They will do this until they can adequately provide enough supply to meet the current overwhelming demand while meeting adequate stock preparations for the future. Then, they would lower the price to meet broader market demand.

Food Inflation Reason #2

farmers working on their fields

They are experiencing semi-inflation of their own due to bottlenecks within the transportation and import/export industry. Shipping also took a massive hit along with our food industry.

And, to compensate for the influx in supplies needing transport, they raise their prices. Since the cost of incoming supplies to operate rises, then so must production expenses.

This external factor of inflation and the costs compounded by liquidating months of revenue have slowed their success in reaching a fixed and variable cost equilibrium rate.

Food Inflation Reason #3

farmers working post pandemic

They resort to drastic food inflation measures to recover their losses as fast as possible and raise prices as much as they can on the supply they can provide to exploit demand, all without potentially triggering a call for Government-Issued Inflation Repression.

This would prevent them from using high demand by limiting their inflation rates beyond a certain point, causing them to miss their goals of reaching positive revenue generation.

These are only a few of the many possible reasons we can expect the US food inflation rate to climb. Honestly, after comparing the food inflation rates forecasted for 2021 from last year to where we stand today, the market is fairing significantly better than anticipated over recent months.

Of course, we are still living in the fallout of last year’s spiking prices. But, by this point, the rate of inflation was anticipated to surpass the hyper-inflation following the stock market crash in 2008.

According to The United States Food Inflation Records, inflation rates during the pandemic peaked at 4.5% (June) and maintained an average of 3.9% (Jul-Dec) for the rest of 2020. This year, the quarterly average dropped from 3.8% (Jan-March) to 2.3% (Apr-Jul).

Should We Prepare For Food Inflation? 

homeless person because of food inflation

It’s always important to prepare for any event that could take place in the future. No one expected Covid to shut the world down, so no one can predict what kind of inflation we’ll see down the road.

We can expect, what we can know, is how prepared we can be for those events. There are numerous ways to protect yourself from market inflation.

Luckily, many of those practices can also be applied to protect yourself from being victimized by food inflation.

Commodities

Commodities are physical, essential items that carry an inherent value. They are always in demand and can be sold and traded anywhere there is human life demanding said commodity.

Concerning food inflation, these items would include seeds, agricultural equipment, farming supplies, food dehydrators, grains, sugar, etc.

Even more common commodities like gold or other precious metals can be exchanged in return for supplies and food.

When the value of the dollar drops and the price of food goes up, the selling price of commodities such as these rises dramatically because of the firm, new demand to have them.

Personal sellers can set the price as they choose and find buyers willing to pay the fee or exchange equally valuable resources.

Stockpile Food

image

Why rely on the fickle inflation of food prices at the store when you know you can have a large stockpile of food on hand that will never unexpectedly increase in cost because you’ve already bought it.

Buying surplus amounts of non-perishable reserves, or long term survival foods, will guarantee you only have to pay a single price for that item once.

If you have significant amounts of food on hand, you won’t have to dread going to the store when an emergency happens to determine the prices have shot beyond what you can afford.

Or, even worse, they are entirely sold out of everything due to people panic buying in bulk.

That food can even be sold or traded with unprepared people down the road if the emergency persists beyond what was promised.

Gardening

ways to avoid food inflation gardening

Not only is gardening therapeutic, but it also provides the benefit of sustainability. Planting seeds now guarantees a promise to yourself and loved ones that you can have fresh produce and harvest in the future to fall back on.

Growing your food is not only a means to an end but a valuable skill that can be broadened to make you an essential member of the community in the most extreme and apocalyptic of scenarios.

If you have a continuous supply of fruits, vegetables, grains, etc., you produce, you have an abundance of wealth and security against the next time food prices experience hyperinflation.

If another catastrophe shuts down all industry imports and exports again, you won’t have to worry when or if the grocery store will have food again.

You’ll be able to fall back on the harvest you’ve grown reliably.