If you've gone to the grocery store and/or out to eat, prices for meat and other food certainly seems to have been on the rise at the store in recent months, and it’s also costing more for companies to buy those meat products further up the production line. We saw that reiterated in
the Producer Price Index report that came out on Friday, which continued a rise in overall prices that businesses have to pay, and food was a main reason why.
…The index for final demand goods moved up 1.0 percent in August after increasing 0.6 percent in July. In August, half of the broad-based advance can be attributed to a 2.9-percent rise in prices for final demand foods. The indexes for final demand goods less foods and energy and for final demand energy also moved higher, 0.6 percent and 0.4 percent, respectively.
Product detail: About a quarter of the August advance in prices for final demand goods can be attributed to an 8.5-percent rise in the index for meats. Prices for residential natural gas, industrial chemicals, processed young chickens, motor vehicles, and steel mill products also moved higher. In contrast, the index for iron and steel scrap decreased 3.7 percent. Prices for diesel fuel and for natural, processed, and imitation cheese also moved lower.
The prices paid to food producers are now up 12.7% in the last year, and for the last step before going to stores, restaurants and final sale places, food prices are now up 24.9% compared to August 2020.
The Biden Admininstration thinks this rise in prices isn't entirely market-driven, and is
planning to increase oversight of the major meat producers in the country. The Administration claims those businesses are cornering the market, and are using that power to raise prices as a result.
As part of a set of initiatives, the administration will funnel $1.4 billion in COVID-19 pandemic stimulus money to small meat producers and workers, administration aides said in the blog post. They also promised action to "crack down on illegal price fixing."
Four companies slaughtered about 85% of U.S. grain-fattened cattle that are made into steaks, beef roasts and other cuts of meat for consumers in 2018, according to the most recent data from the U.S. Department of Agriculture (USDA).
Biden Administration officials note that large meat producers were bailed out by CARES and other federal assistance in 2020, and have been helped by the higher demand that has come from those COVID relief measures. But now those same companies are able to get increasingly higher prices for their products, at the (literal) expense to many other Americans.
Price increases in beef, pork and poultry have driven half of the increased prices Americans have paid for food they eat at home since December, the White House said. The administration sees those companies collecting too much profit after the stimulus helped prop up demand for their products.
"We've helped sustain this market, and it's frustrating to see these companies turn around and raise prices," Bharat Ramamurti, deputy director of the White House's National Economic Council, said in an interview. "What we see here smacks of pandemic profiteering and that is the behavior the administration finds concerning."
It's clear that someone’s making a lot of money in the markets for the raw materials, but it’s definitely a costly situation for those at the end of that processing line. These price increases are widespread across a lot of key types of food. And the recent increases are just the latest bump up in a sizable rise over the last year.
But there’s one group of food producers that aren’t paying or getting better prices these days, and it’s a group that’s especially relevant to Wisconsin.
And overall milk prices have given back the gains they had in the 2nd half of 2020, and
current futures have milk prices going lower through September.
Which means we may well need targeted relief for dairy farmers at the same time that the Biden Administration is going after meat producers for having their prices go up by so much.
We’ll see tomorrow how much of these added costs at the producer level are being taken out of the wallets of consumers when they buy this food, with the release of the Consumer Price Index numbers. And given the jump in producer prices for food, that CPI number may well continue on the rise for at least a few months, that may not necessarily be a bad thing on its own, as wages and associated demand have been going up, as annoying as some of the higher prices may be.
But if consumers drastically change habits in the coming weeks in the face of the higher prices, some of these producers (small and large) might get thrown for losses....or at least have their large profits limited. Which may not be so bad for the consumers' pocketbooks, but might ripple into the job market unless handled correctly.
I don't know if this makes a difference but much of the milk from CAFOs is bought by large food corporations for use on pizza, frozen pizza and other packaged foods. Sargento is probably the largest. The little farms don't have access to this market.
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