Coronavirus causes food prices to soar to record highs

The disruptions caused by the Wuhan coronavirus (COVID-19) pandemic have caused U.S. food prices to skyrocket to its largest monthly increase in 46 years. At the same time, analysts caution that prices will remain high for the time being.

Meat prices, in particular, could remain high as slaughterhouses and meat processing plants struggle to maintain production while simultaneously implementing procedures meant to keep workers healthy.

Meanwhile, prices increases for staples such as flour and eggs have eased somewhat as demand from consumers has leveled off. Prices for carrots, potatoes and other produce, however, remain volatile due to transportation issues, as well as the health of workers who pick crops and work in processing plants. (Related: Coronavirus infections at meat plants are already leading to grocery shortages.)

Biggest food price increase in almost half a century

According to the Department of Labor, the 2.6 percent jump in food prices in April was the biggest monthly increase in 46 years. Increasing the most were prices for meats, poultry, fish and eggs, which went up by 4.3 percent. In particular, the prices of eggs reached a record high of more than $3 a dozen in late March, but have since fallen to less than $1 a dozen.

Prices for cereals and bakery products went up by 2.9 percent, the largest increase ever recorded by the agency. Meanwhile, the prices for fruits and vegetables, as well as dairy and related products, increased by 1.5 percent in April.

Meat products have seen the biggest increase, mainly due to illnesses among workers in meat processing facilities. The pandemic has hit pork processing plants the hardest; however, beef and chicken processors have also been impacted, as thousands of workers have tested positive for the coronavirus. As of Friday, at least 44 workers have died of COVID-19, according to the United Food and Commercial Workers union. (Related: Almost 900 workers test positive for coronavirus at Tyson’s meatpacking plant in Indiana.)

In April, retail prices for ham and boneless pork chops were nearly 6 percent higher than in March, and retail prices for sirloin steak and hamburger were about 4 percent higher, according to the Department of Agriculture. The price of whole fresh chickens, on the other hand, increased by more than 12 percent.

After having to close due to outbreaks of the virus among its workers, most pork plants have now reopened, but not at full capacity. This has forced pig farmers to euthanize animals that couldn’t be processed.

“There are biological constraints to this and that’s why I would anticipate prices to stay high at least for some period of time,” said Trey Malone, an agriculture economist at Michigan State University. “If you’re going to euthanize thousands of animals and it takes six months to raise a new one, obviously there’s going to be some type of delay or buffer in the supply chain.”

Meanwhile, Jayson Lusk, an economist at Purdue University, says that while he’s optimistic that the worst of the meat crunch is over, it’s always possible that a second wave of the illness could cause the situation to get worse.

When the pandemic first started, it was a combination of increased demand from people who were panic buying, combined with disruptions to supply chains that drove prices up. However, as industries begin to reopen, the same safety measures that have allowed businesses to do so are now also affecting prices.

Bolthouse Farms CEO Jeff Dunn said that he did not anticipate any new supply problems. However, he noted that there is an additional cost to implement and maintain procedures to keep workers healthy — a cost that someone has to pick up.

“There is real cost being built across every supply chain. Not just with us but with the retailer in terms of incremental cost associated with COVID,” explained Dunn. “At some point, if you want any chance to hold up any kind of margin, those costs are going to have to be passed on or somehow recognized by the government with some help.”

Can Americans afford increased food prices?

With food prices remaining high, the question now is whether Americans can weather the storm. Agriculture Department data shows that the percentage of their paycheck that Americans have spent on food has continually gone down over the past 50 years.

This data seems to indicate that many Americans can handle the recent price increase. However, the coronavirus pandemic has also left roughly 41 million Americans without jobs. For them, even a small increase in prices can be troubling.

“We’ve obviously seen this record increase in unemployment filings, and so there are more people who are at risk in that sense that they literally don’t have any employment to secure the money that they would need to buy the food that they traditionally purchase,” stated Malone. “For the people who are already operating on the margins, these price increases are nontrivial.”

Sources include:

APNews.com

ERS.USDA.gov