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An inflation hold-out, produce prices taking flight

by The Washington Post | February 9, 2022 at 2:26 a.m.

In the past year, inflation spread through grocery stores, spilling into into the meat department, milk, eggs and even toothpaste.

Fresh fruits and vegetables were largely spared. Until recently.

The percentage increase in produce prices from November to December was twice that of other food categories, according to the U.S. Bureau of Labor Statistics. (Prices for meat, poultry, fish and eggs actually declined a bit in December after rising for seven months straight.) Produce prices stayed nearly flat in 2020, rose slightly in most of 2021, then really shot up in the last four weeks of the year, according to data from the International Fresh Produce Association.

The increases have been felt by groceries, restaurants and others. The average price-per-pound of fresh vegetables shipped in December was 19% higher than a year earlier, and fresh fruit was up 10% from the previous year, according to the research firm NPD Group, which tracks food shipped to restaurants through major distributors such as US Foods and Sysco.

Produce is a "cart starter," said John Ross, the chief executive officer of the Independent Grocers Alliance, a chain of grocery stores that operates in more than 30 countries. What that means is that grocery stores live or die by whether they are a good source of produce, so every store tries to hold those prices down for as long as possible, Ross said.

When inflation is at 2 or 3%, grocery stores have tools to shield shoppers from those increases, but when inflation gets over 5 or 6%, a retailer runs out of options.

"What that really means is intense pressure on lower- and middle-income consumers," Ross said, "because those increases have to be passed on to them."

The squeeze is not felt only at grocery stores, but also at food banks feeding the neediest Americans. For the Greater Boston Food Bank, bananas went from $10 per case to $12.30 in the past two weeks, said Catherine Drennan Lynn, a spokeswoman for the food bank. Apples are up 20%. Citrus is up 7%. Packaged salads were up 5% at the end of December. Lynn said even canned vegetables are up 20%.

She said that although the food bank hasn't had to deal with any long-term shortfalls, 15% to 20% of inbound food deliveries have been delayed or vanished altogether because of problems in the supply chain. "Clearly, we're having to spend more on food across the board," Lynn said.

Some of the reasons for higher produce prices are the same labor shortages, transportation problems, fuel-price increases and supply chain hiccups that have plagued other parts of commerce during the pandemic. But some culprits are new.

IMPORT ISSUES

During winter, the United States relies more heavily on imports from Mexico and South America, especially fruit. The Mexican minimum wage has almost doubled in the past four years. And on Jan. 1, it rose 22%. Increased wages add to production costs, which often pass upstream to wholesalers, retailers and consumers. And for items such as table grapes, which are shipped from Peru after California's fall harvest has ended, the container rate a year ago was $5,000. It's now $12,000, according to David Magana, a senior analyst for RaboResearch Food & Agribusiness.

"Prices for table grapes have risen double digits in the past couple weeks," he said. "That's one commodity where transportation costs are having an impact."

Another problem that is slowing produce imports, and thus making them more expensive, is a new agricultural inspection program at the Mexico-U.S. border "that caught people by surprise," according to Michael Swanson, Wells Fargo's chief agricultural economist. "Any time you slow down the throughput, you reduce availability; the net was it increased prices."

CHANGING TASTES

Demand for fruits high in vitamin C, vegetables high in antioxidants and items reverentially described as "superfoods" has exploded during the pandemic, Magana said. Months of remote work led to what he called "the smoothie effect" -- many people stuck at home wanted to whiz up something healthful and convenient, and some changes in consumption are sticking, he said.

For millennials and Gen Z consumers, who make up an increasingly large segment of grocery consumers, there is a "cult of fresh," meaning a strong preference for fresh fruits and vegetables and an aversion to canned goods, Magana said. For Florida oranges, which this year were the smallest crop since 1945, prices rose about 6% in January, according to the market research firm Nielsen. Younger generations are driving demand for fresh berries such as blueberries 52 weeks a year, which increases transportation costs for those items sourced from far-flung places when they are not in season domestically, Magana said. In the last week of 2021, prices for conventional blueberries were 45% higher than the year before, according to USDA data analyzed by Agronometrics, a market research firm.

A year ago, the United States had record shipments of avocados coming from Mexico. This year, there just aren't enough to meet demand, which has driven prices higher. Avocados are 100% more expensive than they were a year ago, according to Magana, now costing $50 per carton.


Print Headline: An inflation hold-out, produce prices taking flight

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