Farm consolidation, pandemic contributing to rising food costs
August 4, 2021
As consumers continue to see rising food prices in the grocery stores and at their favorite restaurants, many wonder what’s going on. Several factors are contributing to rising costs, but experts insist some price hikes are normal.
“The cost of food is rising for several reasons,” said Matthew MacLachlan, economist in the Food Markets Branch of the Food Economics Division of the United States Department of Agriculture – Economic Research Service. “It’s important to note that food prices typically rise. Over the past 20 years, the average rate of inflation for all food has been approximately 2.4 percent.”
The Consumer Price Index, a measure of economy-wide inflation, increased by 0.9 percent from May 2021 to June 2021, which is up 5.4 percent from June 2020, according to the USDA’s Economic Research Service website. The rate of change depends on where food is consumed.
“Prices for food consumed at home are rising about as fast as they have in recent history at 1.6 percent,” MacLachlan said. “Prices for food consumed away from home – typically at restaurants – have increased more quickly at 2.8 percent and have already reached the average rate of inflation. We expect this rate of inflation to be between three and four percent by the end of the year.”
Food prices increasing the most include fresh fruits and meat. Low citrus production in California and Florida and severe weather in Texas earlier in 2021 are contributing factors to higher fruit prices, MacLachlan said. Supply chain disruptions during the worst of the covid-19 pandemic as well as strong domestic and international demand are contributing to the increasing meat prices.
America’s agricultural landscape is also evolving rapidly as smaller farms are less likely to survive the consolidation process happening in the industry. The USDA said agricultural innovations, productivity of the industry, economics of the food sector and technology adoption are all major contributing factors to the costs involved in food production. Precision agriculture and supply chain management have garnered an especially large amount of interest in recent years.
Monroe, Wisconsin dairy farmer Dan Wegmueller is not surprised at the rising food prices despite many consumers believing farm consolidation will provide lower food costs.
“American agriculture has devolved into a feudal enterprise where a handful of companies control the vast majority of food processing and distribution, and individual farmers have no real economic or social autonomy whatsoever,” Wegmueller said.
He continues to worry about the ever-growing gap between producers and consumers. As more farms become factories, that gap increases. Connecting is crucial for survival, he said.
“This separation puts farmers at odds with the very people they are supposed to be connected to – consumers,” he said. “The greatest irony of all is that American agriculture is hell-bent on making the same mistakes we have made in the past. This will not end well.”