- Food contributed to the largest increase in consumer prices since 1982, with inflation rising 7.5% in the past 12 months, according to the US Bureau of Labor Statistics. Consumer price index for January. The price of door-to-door food has increased by 7.4% over the past 12 months and by 1% on a monthly basis in January. This compares to a 0.5% increase in December.
- In January, price indexes for five of the six major home food categories rose, with cereals and bakery products having the largest increase at 1.8%, according to the BLS. Domestic prices for other foods increased by 1.6%, dairy products by 1.1%, fruits and vegetables by 0.9% and prices for meat, poultry, fish and eggs by 0. .3%. The only group that did not experience a monthly price increase was soft drinks.
- As food manufacturers enter their third year of supply chain disruption due to the pandemic, they are passing on rising labor, transportation and ingredient costs to consumers, without any sign of slowing demand.
Overview of the dive:
Rising flour prices contributed to the overall increase in grains and bakery products in the first month of 2022, according to BLS data. Prices for flour and prepared mixes rose 2.9% month over month and 10.3% over the past 12 months. Prices for cakes, cupcakes and cookies rose 2.4% on average in January and more than 6% year-over-year. Bread prices rose 1.1% on a monthly basis and 5.9% year-over-year.
An important cause of the rise in flour prices is the “excruciating” weather in wheat-growing regions in recent months, Carlos Mera, head of agricultural commodities market research at Rabobank says fortune this past November. Wheat hit its highest price in nearly a decade that month, topping $8 a bushel, according to MarketWatch.
Over the past 12 months, breakfast cereals have seen a 5.2% price increase, according to BLS data. On a monthly basis, prices actually fell 1.4% in January after rising by the same amount in December.
During Kellogg’s call for quarterly results last week, chief financial officer Amit Banati said the company was seeing rising costs for common ingredients, including wheat, corn and oil. The price of corn has increased by 45% in 2021 year on year, S&P Global published. Global vegetable oil prices also rose significantly, hitting an 11-year high in January, according to the FAO Food Price Index.
Kellogg CEO Steve Cahillane said the maker of Kellogg’s Frosted Flakes and Froot Loops may raise prices again as it sees double-digit cost inflation on its ingredients and packaging materials, as well as higher transportation costs. Labor has also been a constant problem, made worse by the 11-week strike at the company’s grain mills last fall, and a fire at its ready-to-eat cereal plant in Lancaster, Pennsylvania in DecemberCahillane said.
“Bottlenecks and shortages on everything from labor to materials to freight have hampered supply across the global economy and created additional costs and difficult inefficiencies to plan,” he said.
General Mills, maker of cereal brands such as Cheerios and chexas well as Betty Crocker and Bisquick baking mixes, are looking to diversify ingredient sources due to supply bottlenecks, the executives said during its most recent earnings call in December.
Over the past year, the largest price increase in the home food index has come from meat, poultry, fish and eggs, up 12.2%. Beef and veal prices led with a 16% year-over-year increase. During Tyson’s latest earnings call, CEO Donnie King shared that the meat giant was passing on higher labor, transportation, food and other costs to consumers, a strategy that resulted in double-digit increases in profits and sales.
Indeed, consumer demand is unlikely to decline even if price increases persist through 2022, CoBank economist Rob Fox said in a note.
“We believe consumer food spending patterns, which have become firmly entrenched after two years of the pandemic, will persist for quite some time, even if COVID fades into the background by mid-year,” he said. said Fox. “The combination of tailwinds from pricing actions now taking full effect with continued strong consumer demand means food retail manufacturers will continue to deliver strong profits in 2022.”