"Food Prices Are Going To Double"

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Riddick
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"Food Prices Are Going To Double"

Post by Riddick » 06-15-2022 01:26 PM

While Americans grow weary of record high gas and grocery prices, another round of price increases is making its way through the food supply chain and is expected to reach consumers this fall.

“People don’t realize what’s fixing to hit them,” Texas farmer Lynn “Bugsy” Allen said. “They think it’s tough right now; you give it until October. Food prices are going to double.”

The 8.8 percent increase in food prices that Americans have already seen doesn’t take into account the dramatically higher costs that farmers are now experiencing. That’s because farmers pay upfront and only recoup their expenses at the point of sale, months later.

“Usually, what we see on the farm, the consumer doesn’t see for another 18 months,” said John Chester, a Tennessee farmer of corn, wheat, and soybeans. But with the severity of these cost increases, consumers could feel the effects much sooner, particularly if weather becomes a factor.

“Nothing that consumers are paying is going to bridge the gap for farmers right now,” according to Lorenda Overman, a North Carolina farmer who raises hogs and grows corn, soybeans, and sweet potatoes. She said the spike in fuel costs has put her farm into the red this year.

“The prices now have not hit the grocery stores yet,” but she expects they will start to by the end of summer.

Much of the cost of food hinges on the price of oil. Chester said fuel and fertilizer together make up 55 percent of his total costs. The price of diesel fuel has more than doubled, to more than $5 per gallon today from $2.50 per gallon at the end of 2020. Farmers say the cost of fertilizer, an oil derivative, has tripled and in some cases quadrupled.

Samantha Power, head of the U.S. Agency for International Development, said the solution to rising fertilizer prices is “natural solutions like manure and compost, and this may hasten transitions that would have been in the interest of farmers anyway. Never let a crisis go to waste.”

“That’s not the real world,” Overman said. “We are in the highest density for hog production in the nation and there’s not enough hog manure or turkey manure or chicken manure to fertilize our crops. We tried this fall to lock in some chicken and turkey litter to spread on our crops and there’s none to be had. There’s just not enough animals to produce the amount of fertilizer we need.”

Together with ruptures in global supply chains, oil and food prices are a key reason why many economists think the Fed will have a particularly hard time taming inflation.

“There is a real risk the price [of gas] could reach $6 a gallon by August,” Natasha Kaneva, head of global oil and commodities research at JPMorgan Chase, told reporters. “U.S. retail price could surge another 37 percent by August.”

The higher prices climb, the more aggressive the Fed will need to be to contain inflation.

Asked what Biden could do to help farmers, Allen said, “Lower the fuel prices. It will save the middle-class people. It will help them when it comes to buying food.”

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