grocery prices

Food Prices Continue To Rise

May 16, 2021 By Max Erkiletian Leave a Comment

It started with empty spots on grocery store shelves amid the pandemic. As a result, food prices soared. Now, with vaccinations up and COVID-19 infections down, you might think those prices would be down.

However, grocery prices continue their upward trajectory.

Research firm NielsenIQ reports that seafood has climbed 18.7 percent while baked goods have increased 7.5 percent in the 13 week period ended April 24.

Grocery store prices overall are up 3.3 percent from March 2020 to March 2021, according to the U. S. Department of Agriculture (USDA). If you ordered from a restaurant during that time, your meal costs rose 3.7 percent.

Consumer Price Index Increase

The Consumer Price Index (CPI) rose last month to 4.2 percent over the previous April. That is the highest inflation rate since September 2008. Most importantly, the core CPI, which tracks food and energy prices rose 0.9 percent. Consequently, that was 0.6 percent above projections.

Short-Term Volatility

Food prices can move almost instantly with a change in weather, geopolitics, social unrest, and a variety of other factors.

A combination of events has come together to impact current food prices.

Oil and Supply Chain

Gasoline is used to fuel everything from tractors used in the planting and harvesting of grains, vegetables, and fruit to delivery of those products in addition to meat and fish. As a result, any price increase in oil contributes to price increases in food.

In addition to gas prices, problems in the supply chain impact not only food prices but other grocery store items. For instance, remember the toilet paper shortage?

Climate Change

Extreme weather events, as well as gradual changes, have had an impact on the food supply. The most recent major weather event is the winter storm that wreaked havoc deep into Texas.

The immediate impact of that storm was knocking out the power grid. That left people without heat and electricity as temperatures dropped to record lows. However, the long-term impact has slashed the supply of many food sources.

Losses from that one storm have been estimated at $600 million. Of that, $14 million in milk, cattle, and poultry were lost. In addition, a vast array of fruits and vegetables were destroyed.

Government Supplements

Government policy has had some effect on food costs by driving up corn prices. More corn is going into fuel tanks. As a result, less is going into stomachs.

The U. S. government pays subsidies to use corm for biofuels. As a result, the price of corn has risen and there is less corn to eat. The creation of ethanol consumes 37 percent of the nation’s corn. That’s more than six times the amount used in 2000.

The Pandemic

You’ve heard it before, but it bears repeating. The pandemic upended the food supply and helped drive up the cost of food and many other goods.

The pandemic accelerated in March of last year. Many states and cities instituted safety measures that lead to more people eating at home more often. That increased the demand for groceries. Meanwhile, nations began closing their borders to limit the spread of COVID-19. That disrupted shipping which further limited the food supply. As a result, prices went higher.

Limited Stockpiles

The World Trade Organization (WTO) limits the amount certain foods, such as corn and wheat, can be stockpiled. That policy is designed to level the playing field between countries that subsidize farmers and those that do not. This policy is effective in times of abundance. However, it worsens the problem during shortages.

Rising Meat Prices

Another factor increasing food prices is an increase in meat consumption – especially pork. People around the world are becoming more affluent. As a result, those who could not afford meat a few years ago now can.

So, you say, just raise more animals. Fine, but the animals you want to eat have to eat as well. That leads to a need for more grain. That increase in demand raises grain prices even more. That leads to higher meat prices.

The Darkness Before The Dawn

Reading all the above and watching prices climb at the grocery may lead you to think the solution is simply not to eat. That’s been tried and most agree the results are not satisfactory.

Take heart, the high prices we are experiencing today and, perhaps, for the rest of the year are not permanent.

USDA Predictions

The Department of Agriculture is expecting grocery prices to rise another one to two percent in 2021, before stabilizing as the pandemic passes. Restaurant food costs will grow by another two to three percent, says the USDA.

The Agriculture Department is even predicting beef and veal prices will drop between 1.5 to 2.5 percent by the end of the year.

Of course, the USDA projections can not predict whether a hurricane, tornado, flood or other natural disasters will disrupt the food supply.

Conclusion

There are many things you can not do about food prices. You can not increase grain yields, cut transportation costs, or change the weather. However, you are not powerless. You can exercise a plan of action to minimize the effects of rising food prices.

There are many sources for inexpensive recipes online and in publications. You can also set a budget and stick to it. Here are some other ideas for fighting food costs.

If you enjoy reading our blog posts and would like to try your hand at blogging, we have good news for you; you can do exactly that on Saving Advice. Just click here to get started. Check out these helpful tools to help you save more. For investing advice, visit The Motley Fool.

Weekly Financial Wrap: Jobs, Stocks, Govcoin, Food Prices, Office Perks

May 15, 2021 By Max Erkiletian Leave a Comment

Why Did Stock Explode When Jobs Bombed?

April’s jobs report was lower than expected, but Wall Street didn’t care.

The U. S. economy produced only 266,000 new jobs in April. The private sector added 218,000 jobs. Meanwhile, government employment rose by 48,000. As a result, unemployment moved from 6 to 6.1 percent.

Stocks React

Following the release of the jobs numbers, all the major exchanges posted gains. The Nasdaq moved up 1.1 percent, the S&P 500 gained .7 percent, and the Dow rose .4 percent.

The jobs report had no impact on the markets. So, what caused them to move up? Inflation fears were eased. However, since that time some inflation concerns have increased stock volatility.

Federal Reserve (Fed) Chair Jerome Powell said he would want to see several strong jobs reports back-to-back before reducing Fed treasury purchases. As a result, the 10 year Treasury yield fell three basis points to 1.54 percent immediately after the jobs report.

Why Jobs Did Not Meet Expectations

Some speculate that federally enhanced unemployment benefits have caused unemployed people to shun work. So far, 11 states, Alabama, Arkansas, Idaho, Iowa, Mississippi, Missouri, Montana, North Dakota, South Carolina, Tennessee, and Wyoming, have announced they will bar residents from accepting federal unemployment checks in June or July. The program is scheduled to terminate on September 6.

However, economists and Biden administration officials discount that argument. They cite a shortage of workers with qualified skills for some jobs. In addition, some employees may still be concerned about safety.

“It’s clear that there are people who are not ready and able to go back into the labor force,” Treasury Secretary Janet Yellen told reporters, citing parents whose children are still learning remotely. “I don’t think the addition to unemployment compensation is really the factor that is making a difference.”

A Closer Look

Data released in the Labor Department report shows some interesting causes for the modist jobs performance.

Automobile and parts manufacturers cut 27,000 jobs last month. This has been linked to the semiconductor chip shortage and supply chain problems.

There were significant gains in the hospitality industry. Hotels added 54,400 jobs. In addition, bars and restaurants hired 187,000 people. However, food and liquor stores dropped 49,400 jobs. Both may be the result of the easing of pandemic restrictions.

Delivery services is another area where the reduction in COVID-19 fears made an impact. Currier and delivery service reduced employment by 77,400.

Bottom Line

According to the Labor Department, 9.8 million Americans are out of work. That is a high number, but far below the 23.1 million in April last year.

As President Biden said following the report, “Our efforts are starting to work. But the climb is steep and we still have a long way to go.”

Grocery Prices Rising

The old question was – which came first the chicken or the egg? Now, it might be – which costs more?

SA will look at why the cost of groceries is going up in Sunday’s focus article.

Govcoins Coming

The sustainability of cryptocurrencies and their challenge to the currencies of central banks is forcing national governments to enter the world of digital money. As a result, we are in the middle of history that will likely be studied for centuries.

The New Money

The rise of cryptocurrencies is creating a decentralized world of finance. However, since they also challenge conventional currencies, more governments are planning to issue their own cryptocurrencies.

Called Govcoins, these state-produced cryptocurrencies promise to make digital currencies work more efficiently and reliably. However, they may dramatically change how retail banks operate or threaten their existence.

Central Banks

Govcoins would be created and processed through central banks, such as the Federal Reserve Bank, Bank of England, or other national banks. That would give such institutions control over the digital currency. The influence of networks and individuals would be reduced or eliminated.

Instead of having a checking or savings account with your local bank, your Govcoin would be in a central bank. Transactions would be processed through a payment app.

That could lead to individuals and businesses leaving their digital funds in the central bank. As a result, your local bank might not have money to make loans.

Threat to American Influence in the World

Today, the world’s reserve currency is the U. S. dollar. That is strengthened by America’s open capital markets. However, cryptocurrencies have the potential to upend the dollar’s dominance by offering an alternative means of moving payments across borders.

If U. S. policymakers want to preserve that dominance, they may have to establish an American Govcoin.

A Long Way To Go

Over 50 countries are researching and some are implementing digital currencies. China has introduced a limited version of the e-yuan; the European Union is planning an e-euro by 2025 and America is exploring an e-dollar.

The technical challenges of a nation issuing a cryptocurrency are relatively simple. The great questions are how to preserve individual privacy and what role central and retail banks will play in the future. Historic times indeed.

New Office Perks

Most major employers are offering vaccines and changing workspaces to increase employee safety and promote a return to the office. However, some companies are going a leap further.

CoStar, an analytical and research service company. is offering workers who return to the office the chance to win a Tesla Model S. However if cars are not that enticing, they are also offering $10,000 in cash and a trip to Barbados.

The incentive program was conceived soon after CoStar offered COVID-19 vaccines to employees. Even with the vaccine, many employees were reluctant to get back in the office. However, with the chance to win one of the big prices, over 30 percent of the workforce has returned to CoStar offices.

Cash Bonus For Taking Vacation

Another weird new employee benefit arising from the pandemic has employees getting a bonus to take vacation time.

Many employees working from home have not made use of vacation time. That has created a logjam of time off for many employers. As a result, some have resorted to unusual measures to induce employees to take a break.

PricewaterhouseCoopers (PwC), a global assurance and consulting firm, is paying employees $250 for every week of vacation they book for the next year up to $1,000. Meanwhile, other companies, such as Google, are giving employees an additional vacation day for booking time off.

Why Has the Price of Groceries Increased During COVID-19?

May 29, 2020 By Susan Paige Leave a Comment

Many Americans are struggling to stay on budget. Widespread unemployment means many households are having trouble making ends meet, for one. However, there are other financial impacts of COVID-19, including rapidly rising grocery prices.

How Much Grocery Prices Have Changed

Prices on many food staples have increased dramatically in recent months. In fact, the one-month price increase was the largest in 46 years, leading consumers to pay an average of 2.6 percent more at the register. The last one that outdid it was in February 1974.

Categories that saw the biggest increases included meat, fish, poultry, and eggs. When it came to eggs, the average price hike was over 16 percent.

However, other food categories aren’t unaffected. The price of apples went up by 4.9 percent, while bread and cookies rose 3.7 percent and 5.1 percent, respectively.

Beyond food, items like toilet paper and certain cleaning and medical supplies also saw rising prices. In some cases, price gouging was an issue, leading to toilet paper being sold for $10 a roll, for example.

The massive spike in demand and fast-dwindling supply created an opportunity to take advantage of desperate consumers. While many areas have laws against such activity, that doesn’t prevent it from occurring, at least in spurts. Consumers who needed those items may have had little choice but to deal with being overcharged.

Why Grocery Prices Are Increasing

In many cases, price increases are the result of a simple principle: supply and demand. Once shelter-in-place orders became the norm, and people began spending nearly all of their time in their houses, meals at home became increasingly common.

This put additional pressure on grocery stores as consumers began buying more items or in larger quantities. Inventory in some categories disappeared fast, a fact that can trigger price increases that serve as an attempt to stabilize product availability.

Additionally, grocers had to compete with each other to get products to replenish their shelves. In some cases, this leads to a bidding war, where the highest offer gets the goods. Then, the grocer raises its price on the product to recoup their investment and still turn a profit.

Shifting Workforce Needs

Price adjustments can also be attributed to shifting workforce needs. Many stores had to hire new customer service workers, shelf stockers, and cashiers in droves, leading them to offer higher pay rates to entice people to apply. In some cases, they also had to have more employees work overtime, which usually involves paying wages at time-and-a-half or more. This led to growing personnel costs, something that commonly is balanced by pricing products higher.

Then, as mentioned above, there’s the issue of price gouging. While not as rampant as it may have been initially, instances of the activity may continue until the situation calms.

Finally, there have been some mild to moderate disruptions in the supply chain. At times, producers had to shut their doors in response to the pandemic. Usually, this had nothing to do with shelter-in-place orders, as these companies easily qualify as essential businesses. The issue actually involved the virus sweeping through production facilities, causing widespread illness in the producers’ workforces and a need to disinfect contaminated surfaces.

For example, two Tyson Foods pork processing plants had to shutter in April. Plant employees tested positive for the virus, and many others feared getting sick, creating issues with maintaining a suitably sized staff to support operations.

Even production facilities that didn’t close, at times, had to operate at reduced capacity. Shipping companies felt the strain as well, delaying the arrival of replacement inventory. When the supply chain is disrupted, price hikes are almost guaranteed.

Are Grocery Price Increases Permanent?

In most cases, the grocery price increases won’t be permanent. Though, it’s important to note that falling prices are dependent on market stabilization or supply outpacing demand.

There have already been signs of this occurring for some products. For example, while eggs saw a massive price increase in April, as of mid-May, prices are moving down. In part, this is due to regulatory changes that allowed some egg producers to send product that would usually go to restaurants to grocers instead. Whether the cost will fall to pre-COVID-19 levels isn’t known, but any decrease is likely welcomed by cash-strapped consumers.

But not all categories are seeing a recovery currently. Pork prices may remain higher for a period, mainly due to the supply chain disruption. The plant closures and production level changes led some farmers to euthanize their animals since they had no place to send them. This decreased the available supply. Additionally, demand for pork exports rose, partially due to African swine fever impacting China’s supply before the coronavirus pandemic began.

Are All Prices Rising During COVID-19?

No, not all prices are increasing in response to the pandemic. Certain categories have even seen dramatic declines as people began to change their plans and habits.

For instance, gas prices tumbled as stay-at-home orders meant fewer people were on the road, significantly lowering demand. Transportation and apparel also had notable declines.

Some prices have also been relatively stable. For example, electricity rose a modest 0.1 percent, while new vehicle prices didn’t shift at all.

How to Keep Your Grocery Budget Under Control

The same techniques for controlling your grocery budget that worked pre-COVID-19 also work today. Stores are still holding sales to entice customers to choose them over competitors, so shopping around is beneficial. Using sales flyers to plan meals can also work.

Additionally, being part of a loyalty program and coupons can help you keep your costs down. In both cases, you may be able to secure discounts or deals on items you need.

It’s also important to be open-minded. Unless you have a specific requirement that makes sticking with one brand a must, consider exploring every option available in a product category, including name-brands and store-brands.

By making a change, you might be able to lower the cost of your groceries. Plus, when you factor in sales and coupons, the cheapest option may change from week-to-week, which is why you should always look before you buy.

Are changing prices straining your budget? Do you have any tips that can help people keep their grocery costs down? Share your thoughts in the comments below.

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