Only a small portion of the food that can be eaten in the United States is imported, many from Mexico and Canada, but the spillover effect of the conflict in Ukraine has further increased food prices and kept them at high levels next year. I will hang down. Analysts say. Also, because Russia is a major producer of fertilizers and other pesticides, conflicts could affect what is grown in American soil this year.
Guebert has seen the impact directly. He said his fertilizer cost was $ 510 per ton last year. This year it’s $ 1,508. He said he had to pay it to meet the target yield, and while the price paid for his grain went up, “the price is at a level where no one can afford them. Will reach, “he said.
Even before the conflict, input costs for major segments of the consumer goods industry were skyrocketing, said Jeff Freeman, chairman of the Consumer Goods Association, said food manufacturing prices have risen 14.2% overall since February 2021. Rising fuel costs will drive prices up, and in the grocery category, which relies heavily on commodities grains such as cooking oil, aluminum packaging and wheat, conflict-related uncertainties will drive prices up and supply will be tight. .. This includes bread, baked goods, pasta, cereals, and many items in the central aisle of the grocery store.
Patrick Penfield, a professor of supply chain management at Syracuse University’s Whitman School of Business, said: “But I thought this would be settled by the third quarter and inflationary pressures would drop, but it’s now off all tables.”
Consumers expect more food prices to rise next month, with double-digit inflation expected by the end of this year, Penfield said.
There is no shortage of wheat in the United States, but global supply was the tightest in the 14 years before the conflict. William Osnato, Senior Research Analyst for GroIntelligence Agricultural Data Platform, says the market is ready to be responsive because of this.
Wheat futures rose 29% from February 25, corn rose 15% from that day, soybeans rose 6%, and other commodities grains were dragged along with it.
“Last Tuesday was Wheat Banana Day, the most volatile day in the history of the wheat market,” said Osnat. “During the wild ride, it was the highest ever.”
And on the eve of the planting season, American farmers are ready to make an even more significant impact. High prices for fuel and inputs affect the growth of farmers. The global shortage of vegetable oils such as wheat, corn, sunflower and canola “will be auctioned for China, India and other countries around the world. It will be a bidding war and the highest bid. Wins, “Penfield said.
“Currently the biggest problem is … energy prices, then fertilizer prices, because Russia is the second largest supplier, so that farmers can get the chemicals they need for their soil. You can, “Penfield added. “Farmers will see an overall increase in costs.”
Jed Bower grows corn and soybeans in southwestern Ohio. He wants to start planting this year’s crops in the second week of April, but he’s nervous not only about the prices of the chemicals he needs, but also about their availability.
“Fertilizers and herbicides are difficult to obtain. Retailers keep supplies fairly tight. If you need a roundup of 1,000 gallons a year, you may only have 50 gallons at the moment,” he said. Farmers and produce stores have explained that they do not know how much will be available this year. “They are trying to make some growers accessible. We saw a stream of toilet paper during the covid — and that’s what they’re trying to prevent.”
If they don’t have the fertilizers and other chemicals they need, Bauer is forced to pivot from corn to soybeans, which require more nitrogen fertilizer, and from GM crops to older technologies. There is a possibility.
“I don’t want to do that, but I’ll have to make that decision in the next two weeks,” he said.
Tinglong Dai, a business professor at Johns Hopkins University, said rising gasoline prices have a psychological impact on consumers and raise some prices.
“Gas over $ 5 a gallon discourages many from driving. It will exacerbate labor problems. Retailers and restaurants will find workers unless they pay higher wages. You can’t and you have to figure out how to get those prices back, “he said. “It’s not the food itself. It’s about the people who bring food to the shelves and tables.”
Soaring prices for gas, new and used cars hesitate to expand trucking capacity and make it difficult to recover the supply chain, Dai added. Even consumer behavior would lead to shortages and rising prices, he said.
“High gas prices reduce consumer driving and make more purchases each time you visit a grocery store, making it harder for grocery stores to plan and replenish their inventories,” Dai said. increase.
Soaring fuel prices will also push up prices for other commodities, Osnat said. Brazil is the world’s largest producer and exporter of sugar. Higher fuel prices may give Brazil an advantage in using more sugar cane to produce ethanol. This will tighten the world’s sugar supply and raise prices.
According to Osnato, food and beverage manufacturers have been in the pinch of rising input costs for 18 months. Many have already announced that they are passing those costs on to consumers through full-scale price increases.
“There is no light at the end of the tunnel,” he said. “Companies will continue to pass on as much money as possible for at least another year.”
Sophia Murphy, Secretary-General of the Institute for Agricultural and Trade Policy, states that our food system is so concentrated that 80% of US beef is managed by just four companies. Wal-Mart sells more than a quarter of all groceries. Unilever owns more than 400 food brands. Even if the supply of wheat and corn is tight, consumers will soon see prices skyrocket.
“Companies will ask consumers to pay for it,” she said. “The executive offices of all companies protect the interests of shareholders, hedge risks, and think about what consumers will bear.”
