Dive Brief:
- The consumer price index for food at home increased 10% over the past 12 months — the biggest 12-month increase since March 1981, according to the U.S. Bureau of Labor Statistics’ Consumer Price Index data released this week. Flour, meats, milk, and fats and oils saw some of the biggest year-over-year price increases.
- On a monthly basis, food at home prices rose 1.5%. Butter saw the highest monthly price increase among grocery items, rising 6% in March, nearly double the pace of the previous month’s increase. Over the past 12 months, the price index for butter grew 12.5%.
- Prices for butter have been trending sharply upward since the beginning of the year, due to a variety of factors like declining dairy cow herds, labor shortages at manufacturing facilities and higher packaging costs. The war in Ukraine, meanwhile, has pressured food commodities such as grains and oils.
Dive Insight:
Butter’s price increase in March is the result of an array of precipitating factors. A USDA report this month indicated that a tightening supply of cream on farms in the Northeast is causing production to slow, contributing to the increased prices for butter. The government agency said that demand for butter remains high in both retail and foodservice locations.
The higher butter prices are being reflected in dairy manufacturers’ recent sales results. In March, butter giant Land O’Lakes said that the co-op hit record net sales of $16 billion in 2021, with retail dairy food volumes higher than pre-pandemic levels. However, dairy earnings fell below prior years as supply chain issues caused an increase in transportation and sorting costs.
The CPI for fats and oils increased 14.9% over the past 12 months and 2.9% this past March, buoyed by the rising prices of butter, margarine, salad dressing and peanut butter. Oil prices have soared during the ongoing Russian invasion of Ukraine. Combined, both countries produce 80% of global sunflower seed oil exports. The United Nations Food and Agriculture Organization reported that its global vegetable oil index rose 17.1% from February to hit a record high in March, based on higher costs of sunflower, palm, soy and rapeseed oils.
Flour and prepared flour mixes saw a 14.2% 12-month increase, according to BLS data, with a 2.2% increase in March. Wells Fargo agricultural economist Michael Swanson told Food Dive in a recent interview that wheat prices have risen globally because of supply shortages from Ukraine and Russia, which are responsible for 29% of global wheat exports. American wheat, Swanson said, has been able to make up for the shortfall but is a premium product and tends to be priced higher, which has helped drive up wheat prices. Poor weather also continues to be a factor: According to the FAO, global wheat prices skyrocketed 19.7% in March because of concerning crop conditions in the U.S.
The price index for citrus, which saw the highest jump in the monthly food at home price index in February at 6.8%, eased somewhat with a 3.2% price increase in March.
The inflationary trend is not expected to end any time soon. In an emailed statement, Leslie Sarasin, president and CEO of the Food Industry Association, pointed to predictions from the USDA Economic Research Service that food-at-home prices are expected to increase between 3% and 4% in 2022. Demand will continue to drive price increases, with the average weekly household spending currently at $148, compared to a pre-pandemic average of $113 per week, Sarasin said.
“Grocery prices continue to show some volatility, especially as consumer demand has not abated,” Sarasin said.
