That is why food prices keep rising

(The Hill) – Americans continue to pay more at the grocery store as rising grocery inflation shows no signs of slowing.

Food prices rose 13 percent last year and 0.7 percent in September alone, beating the 8.2 percent annual inflation rate for all consumer goods, according to the latest Labor Department data.

The price of fruit and vegetables increased by 10.4 percent annually, milk by 15.2 percent and eggs by 30.5 percent.

Prices could continue to rise well into next year, experts say, as it’s unclear when fundamental problems like Russia’s invasion of Ukraine, extreme drought and supply chain problems will ease up.

“What we’re hearing and what we’re expecting is that it’s going to be a pretty rocky fall,” said Andy Harig, vice president of tax, trade, sustainability and policy at the Food Industry Association. “I think we’re probably at the end of the second quarter next year before we get to where it’s a little bit more stable.”

Experts are concerned about the risk of a recession combined with high food prices, which have risen over the past month even as the cost of gasoline, cars and other products has fallen.

While Federal Reserve rate hikes slow demand for certain consumer goods, people will always need to buy groceries, limiting the impact of monetary policy on prices.

“When food prices go up, that’s an even larger percentage of the budgets of lower-income households,” said Jordan Teague, policy director at the anti-hunger organization Bread for the World.

“When people have to pay rent or have a doctor’s bill, they have to make really tough decisions about what they don’t want to pay for, and often that means buying cheaper but less healthy groceries or not buying as much.”

The war in Ukraine stifles the offer

Russia’s invasion hit the global food system with a double whammy, reducing food exports from Ukraine – a top supplier of wheat and cooking oils – and prompting Russia to slow its fertilizer exports.

Fertilizer prices rose to record levels this year after Russia, the world’s largest fertilizer exporter, halted supplies in response to international economic sanctions. Belarus, another leading fertilizer producer and Moscow ally, has restricted its exports, as has China.

This has made growing crops more expensive than ever. Higher fuel prices caused by the Russian invasion are making it more costly for farmers and processors to operate equipment and for manufacturers to produce food packaging.

“People knew in the summer that we should plant extra because there will be huge global demand. But planting is so expensive now that in many cases they didn’t have the money,” Harig said.

World wheat prices rose after the invasion of Moscow, which cut off Ukraine’s access to the Black Sea, its main trade channel. This is leading to massive increases in the price of flour, cereal and bread in the US and abroad.

US producers have increased exports to African countries dependent on Ukraine for food and facing widespread famine. Russia and Ukraine struck a deal to allow exports to continue, but Moscow has threatened to reverse it and recently annexed several regions of Ukraine that account for about a fifth of the country’s wheat supply.

Supply chain disruptions remain an issue

Farmers and food processors have reported difficulties moving grain, livestock and other produce due to shortages of truck drivers, refrigerated trucks and railroad workers.

Railroads, which transport about a quarter of US grain, have been plagued by reliability issues preventing food from getting to its destination on time, further shrinking supply. The industry is scrambling to hire more conductors and engineers after laying off large numbers of employees in recent years.

Since May, railroads have missed an average of 14 percent of freight deliveries and arrived late 30 percent of the time, according to the Surface Transportation Board. Railroads were forced to briefly cancel agricultural supplies last month as a possible rail strike was averted but could become a threat to the supply chain again in mid-November.

Barges, which haul 13 percent of U.S. grain, are the latest mode of transportation to face problems. Many barges have difficulty navigating the Mississippi River, a major agricultural canal, due to dangerously low water levels.

The situation is “particularly problematic during harvest season when farmers are trying to move grain into storage facilities,” according to American Farm Bureau Federation economist Daniel Munch.

“Without relief, many producers will struggle to find places to store their goods or face exorbitant wait times and costs for transportation,” he wrote in a post Thursday.

Progressive lawmakers and advocacy groups have criticized large multinationals for failing to invest in resilient supply chains, instead using their excess funds to reward shareholders with share buybacks.

Extreme weather and disease devastated farms

This year’s droughts have devastated US farms, reducing yields and ultimately driving up grocery prices.

Climate change has hit farmers in the American West particularly hard. That has pushed up prices for tree nuts, fruits and vegetables, which are grown almost exclusively in drought-stricken states.

Top trading partners are also feeling the effects of the heat waves. The price of coffee beans rose sharply this year after severe drought hit coffee crops in South America.

At the same time, large outbreaks of bird flu this spring contributed to a 17.2 percent rise in poultry prices over the past 12 months, while other meats saw smaller price increases.

Turkey breast prices hit an all-time high in September — 112 percent more expensive than the same period last year — after widespread outbreaks curtailed production, the Farm Bureau said.