Most recognized in the recent record-high gas prices, the far-reaching effects of inflation are now moving to the food supply chain, experts say.
While it’s tempting to blame individual brands for raising their prices, it’s “simply not true that it’s the manufacturers’ fault that prices are higher. We’re all in this inflationary environment together. We’re all subjects of the same price and cost increases,” Tom Madrecki said Tuesday at The Heritage Foundation’s virtual event “The Latest on Rising Food Prices: Lessons From Across the Food Supply Chain.” (The Daily Signal is the news outlet of the Heritage Foundation.)
Madrecki, the vice president of supply chain and logistics at the Consumer Brands Association, was joined at the event by Mark Dopp, chief operating officer and general counsel at the North American Meat Institute; and Jennifer Hatcher, chief public policy officer in government relations at FMI, The Food Industry Association.
Finding a solution to rising food costs and stabilizing the food supply chain from the effects of inflation is becoming more and more urgent, since “food prices in May were a whopping 10.1% greater than prices in May of 2021,” said Daren Bakst, senior fellow at The Heritage Foundation’s Center for Energy, Climate, and Environment.
“These skyrocketing food prices are devastating for Americans and their families. We all know this, because it’s impacting each one of us in one way or another,” Bakst said.
The speakers offered observations on why food prices are increasing every month, citing several contributing factors, from increased energy prices to the difficulty of finding and retaining quality employees to consumers’ changed buying habits after the COVID-19 pandemic.
“I think the broader question is ‘What is not contributing to higher food prices?’” Hatcher said, noting that food prices are affected by “the labor shortage, energy costs, transportation costs, supply chain bottlenecks, and ingredient challenges.”
Dopp said that, with respect to the meat industry, higher prices reflect a supply that cannot fulfill the record-setting demand—some of it panic buying—that has remained high even after the coronavirus pandemic.
The speakers noted that while many manufacturers try to not raise prices, they ultimately have to pass some of the increased cost of production—including the rising gas prices affecting the transportation of goods or the increased price of component products, such as feed or fertilizer—onto the consumer.
Madrecki noted that it makes sense that rising energy prices are reflected in higher food costs. “The cost [of a product] is baked in multiple times in its journey throughout the supply chain,” he said.
In addition to the rising cost of fuel, he said, the state of transportation in America has also contributed to rising costs.
We were already in a predicament when it came to transportation capacity in this country: We’re 85,000 drivers short, and at any given moment in time, you’re talking about 30% of trucks on the road are empty or significantly underutilized.
There’s a real problem when it comes to finding the capacity necessary to move those products.
In addition to the energy and transportation issues affecting rising food costs, the speakers noted that the labor shortage also has negative effects.
“It’s a constant battle to attract enough talent, but to also retain it,” Hatcher said.
Dopp noted that labor challenges existed “well before the pandemic started.”
“It simply exacerbated those challenges,” he said.
The labor shortage requires long-term, multifaceted solutions, the panelists said, such as immigration reform and quality employee training to maximize retention.
Ultimately, the goal going forward should be to “ensure the resiliency and stability of the supply chain and ensure that people have access to affordable and available products every time they go to the store,” Madrecki said.
Dopp called for a hands-off approach as a solution to rising food costs. “When it comes to the markets and the supply chain, less government intervention is better. Let the forces of supply and demand work,” he said.
Hatcher urged action to ensure customer confidence so that the supply and demand balance is not disrupted:
Our customers need to know that they are going to have the products available that they need when they need them. Otherwise, if they change their buying habits, that will affect supply and demand.
The panelists recognized the frustration with rising food prices, but encouraged policymakers to address the issues of energy prices, transportation issues, labor shortages, and inflation, rather than blaming individual retailers or manufacturers.
“It’s easier to blame a brand, rather than the circumstances that a brand finds itself in,” Madrecki said. “What we’ve continued to try to do is call attention to the real problems and try to develop policy solutions that really zero in on those issues, rather than pointing fingers at private enterprise.”
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