U.S. Food Prices Are Up. Are the Food Corporations to Blame for Taking Advantage?
2021 was a bad year for grocery bills. Shoppers paid 6.4% more for groceries in November 2021 compared to November 2020, according to the consumer price index. All food prices were up a bit more than usual but the most dramatic price increases come from meat, pork cost 14% more than a year ago and beef cost 20% more. These increases are slowing, per consumer price data released January 12th, but show no signs of dropping to pre-pandemic levels anytime soon.
Food companies say rising prices are merely free markets at work—extreme weather and pandemic disruptions increased production costs and diminished the supply of food while demand increased in the U.S. and abroad as people started to emerge from the pandemic. But the Biden Administration and politicians such as Sen. Elizabeth Warren allege foul play. They argue that industry consolidation, especially in meat processing, helps a handful of corporations profit off inflation expectations by raising prices even further. In some respects, both sides are right.
Food companies do face legitimate increased costs and unique shortages, but these aren’t eating into their profits as economists might expect. In fact, the largest publicly traded companies have never had higher profit margins. Such record earnings suggest that food companies have sufficient market power to pass all their higher costs, and then some, onto consumers. Basic economic theory tells us that when a business charges too much, competitors will offer lower prices, take sales, and erode excessive profit. Sustained, exceptional corporate profits raise the question: how much are food companies really competing? And if corporate consolidation helps competitors raise prices together, what will it take to tame price gouging?
Food markets have been out of whack since the pandemic began. Meat prices first shot up as workers fell sick, plants shuttered, and as much as 40% of processing capacity went offline in spring 2020. Plants are back up and running but after some 86,000 meatpacking workers contracted COVID-19 and 423 died, according to a Congressional report, many meatpackers are struggling to fill openings and raising wages. Across the food supply chain workers are coming back from the pandemic and rejecting excessive hours, unsafe working conditions, and stagnant wages that haven’t kept up with productivity growth for over 40 years. For instance, in 1982 the base pay for meatpacking workers in the United Food and Commercial Workers (UFCW) union was $10.69 or $29.14 adjusted for inflation. In May 2020 the average hourly wage across the industry was $15.
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https://www.msn.com/en-us/money/companies/us-food-prices-are-up-are-the-food-corporations-to-blame-for-taking-advantage/ar-AASMpM9
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