Feeling fleeced by pricy filets? Meat, fruit and oats lead the drought-driven surge in food costs

Meats have led the rise in U.S. meals prices, with costs for recent fruits and cereals, together with these produced from oats, additionally strongly larger this yr, on the again of drought situations in components of the nation.

And restaurant menu value will increase, generally known as “food-away-from-home” costs, have outstripped the rise in “food-at-home,” or retail retailer costs.

There was a basic “lack of flexibility” throughout restaurant menus, given larger labor prices and tighter inventories of particular meals gadgets, says Isaac Olvera, lead meals and agricultural economist at ArrowStream, a food-services business supply-chain expertise agency. That each one contributed to the rise in menu costs because the onset of the pandemic, he says.

The buyer value index in September for the food-away-from-home class was 4.7% larger than the identical month a yr in the past, whereas the food-at-home CPI was up 4.5%, according to the U.S. Department of Agriculture.

Learn: Rising wheat prices have French fretful over the cost of a baguette

Labor stays a big problem, and COVID-related protocols, comparable to these associated to worker proximity, are “holding vegetation from working at 100% capability,” says Olvera.

A USDA report in September famous that the “bodily proximity” of employees within the meatpacking business was was a lot higher in contrast with different producers. Meatpacking-dependent U.S. counties noticed almost 10 instances extra COVID-19 instances in early Could, in contrast with different manufacturing-dependent counties.

Meat demand, in the meantime, stays “strong” regardless of document excessive pricing most often, with demand coming in sturdy from a home in addition to worldwide degree, because the U.S. continues to “export meat protein merchandise at a sturdy tempo,” Olvera says.

On the futures market, costs for reside cattle


and feeder cattle


had been every up by over 13% this yr as of Oct. 28, and lean hogs


up 7% .

Learn: ‘Weather extremes appear to be increasing’: Drought conditions send oats, wheat and other commodities soaring

Olvera factors out that “the pandemic-led, to-go motion has been a boon for the business,” as foodservice gross sales have pushed above grocery retailer gross sales.

‘The pandemic-led, to-go motion has been a boon for the business.’

— Isaac Olvera, ArrowStream

Beef and veal, in addition to pork, costs are predicted to rise by between 6.5% and seven.5% this yr, based on the USDA.

“We wouldn’t be stunned to see that as too low heading deeper into the fourth quarter,” particularly on the meat facet, says Olvera. The USDA’s 7.5% improve forecast for each pink meat classes are “more likely to the decrease finish of our expectations,” which stay nearer to the 7% to 9% vary for the pink meat classes.

Recent fruits are one other huge mover this yr, with labor, transportation, drought and demand resulting in the value will increase, he says.

As of Oct. 28, greater than 83% of California, which is among the many largest fruit-producing states, was in an “excessive drought,” which implies water is insufficient for agriculture, wildlife and concrete wants, according to The current, extreme storm wasn’t anticipated to place a lot of dent into that drought.

Learn: California’s ‘atmospheric rivers’ and ‘bomb cyclone’ bring scant long-term rain relief — a look at the Western drought by the numbers

However Olvera is “most involved with the transportation facet” relating to the rise in fruit costs, and mentioned transportation isn’t unique to the fruit class.

“Refrigerated truck availability has been close to its tightest, or the tightest on document since a minimum of 2000,” says Olvera. Since mid-year, the USDA’s refrigerated truck availability index has been the tightest within the report’s historical past in 12 out of 15 weeks, and the speed per mile is “hovering at document ranges,” he says.

Forgo these Cheerios?

Additionally among the many key commodities, oats has seen the largest value rise, with futures costs

up 97% yr to this point.

Spring wheat and oats have been “reduce from the identical fabric,” says Olvera. “Persistent drought all through the Northern plains has contributed to stunted harvested space and poor total manufacturing.” Wheat futures


commerce almost 21% larger this yr.

A USDA report on small grains released in late September estimated that oat manufacturing in 2021 could be at 39.8 million bushels, the smallest on document, down 39% from 2020, with farmers solely harvesting 650,000 acres of oats of a planted 2.55 million acres.

Learn: ‘Toilet to tap’? As the climate keeps changing, more municipalities aim to recycle our most precious resource

Abandoning 1.9 million acres is “really comparatively small,” says Olvera, however what’s “troubling” is the % of acres harvested. At simply 25.5%, that’s “a record-small proportion of an already record-small planted space,” he says.

“There’s not more likely to be a variety of oats round forward,” he says, they usually’re a breakfast staple for issues like oatmeal and different merchandise that embody entire grains comparable to breads, some breakfast cereals and snack bars. Drought has “plagued main rising areas” throughout the Northern plains, in addition to the southern prairies of Canada, the place spring wheat and canola are grown, says Olvera.

On the similar time, the meat cattle sector has seen the biggest U.S. beef cow slaughter fee since 2011 and because the herd contracts, this may “actually spell persistently larger beef costs forward,” he says.

“Feed prices are elevated and pasture situations are poor,” Olvera says. Additionally, amid drier climate and elevated feed prices, dairy cow slaughter charges are rising, so whereas dairy value will increase this yr have been muted, “we’re anticipating costs to agency heading into 2022.”

Even so, the most important influence of drought hasn’t but been felt fairly but, he says.

Total, prices for meals have been “feeling the manufacturing, transportation and labor squeeze, however we’re more likely to see drought impacts choosing up into 2022 as smaller beef cow herd is famous, resulting in fewer total calves,” and a smaller market animal availability over the approaching 16 to 24 months, says Olvera.

Vacation influence

‘Just about all indicators are pointing in direction of larger vacation meals costs throughout the board.’

— Isaac Olvera, ArrowStream

That mentioned, will increase throughout the patron value index for meals at residence and away from residence are more likely to “slender,” however “it doesn’t seem like meals costs are going to return down materially within the close to time period,” he says. As households collect for what stands out as the first huge celebrations because the pandemic started, “just about all indicators are pointing in direction of larger vacation meals costs throughout the board.”

He factors out that turkey provides stay tight so “choose up that vacation turkey between now and early November.” Yr-over-year September poultry costs have climbed by 6.1%, USDA knowledge present.

The availability of turkeys received’t run out, however “late consumers might have slimmer pickings,” says Olvera.

Learn more about drought conditions in MarketWatch’s Special Report | Feeling fleeced by pricy filets? Meat, fruit and oats lead the drought-driven surge in meals prices


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