We are starting to regain some normality to the holidays but amid our anticipation, looming headlines about the price of food hit us in the face and pocketbook. Regardless of the media source, there is a consistent theme: our Thanksgiving dinner (and future holiday meals) will cost more this year. But is this the most expensive Thanksgiving meal ever as some headlines proclaim? Relying on the insights of my favorite ag economist, Jayson Lusk, PhD, one can discover there is more to the story. We, as consumers contribute to the increases, but we can also help balance the reality. Bottom lines are real, and food will cost more. Gathering around the table with more family and friends this year may be pricey but truly priceless.
The Facts Behind the Dollar Sign
First and foremost, we’re still in a pandemic! The initial disruption of the food supply in spring of 2020 did increase food cost at a rate not seen in the past decade. According to Lusk, food prices averaged around 4% for retail and restaurants on a monthly year-over-year basis in the past year. Even though this was higher than the previous 1-2% increase for in-store and away-from home purchases, the actual impact on consumers was negligible.
The current acceleration of food price increases, by contrast, has been headline worthy. Based on Lusk’s calculations, retail food prices are up around 9% as of October 2021, relative to January 2020, for both retail and away-from-home purchases.
Source: CNBC based on U.S. Bureau of Labor Statistics data
Why the spike? Lusk says it is the “trickle-down effect.” When it costs more to produce and process food, those costs are reflected in the price we pay in grocery stores and restaurants. Here are some facts summarized from Lusk’s recent blog “What Is Driving the Increase in Food Prices?”1:
1. The price of raw food ingredients, known as agricultural commodities (e.g., corn, wheat, rice and soybeans) has risen since the beginning of the pandemic. For every dollar we, as consumers, spend on food, approximately 14 cents represents the cost of the basic food ingredient (commodity) at the farm level. These prices have been increasing due to the impact from adverse weather conditions in South America as well as parts of the United States — truly an example of “supply and demand.” Though some farmers have benefited, it is now more expensive to grow crops as the current supply stoppage is contributing to higher input costs like fertilizer and herbicides.
2. The “center of the plate” is central to the overall food price increase. Meat prices — beef, pork and chicken — were 26%, 19% and 15%, respectively, higher this October than prior to the pandemic in January 2020. Since, many consumers spend a higher share of their food dollars on meat products, changes in meat prices have a significant influence on the price categories. Increased COVID-related costs, from personal protective equipment and socially distanced workers in processing plants, to the increased feed prices for livestock and poultry, are all contributing factors to the rise in meat prices. Additionally, increased consumer demand for U.S. meat products globally and domestically plays a role.
3. Consumers in the United States and around the world are buying more of everything, food included! Increased consumer demand contributes to increased food prices. According to Lusk, we are spending more than 20% to 25% on grocery and away-from-home food purchases than prior to the pandemic in early 2020. The influence of COVID economic relief payments and changes in programs like the Supplemental Nutrition Assistance Program (a.k.a. food stamps), which allow low-income households to more easily buy food online, also are likely contributing factors according to Lusk.
4. Essential workers are being paid more. While this is good news, higher wages are reflected in higher food prices. The average weekly earnings of essential workers have increased approximately 19% in animal processing, 16% in food service, 11% in food processing and 9% in food retail.
Food Cost is Not Equal
According to Lusk, “Food isn’t necessarily less affordable — especially when considering a longer horizon.” It’s more about purchasing power and how the price of food compares to changes in income. While calculations reflect that a worker of a median salary would only have to work one third of the time in 2019 to buy the same 20-pound turkey of their counterpart in 1980, there are still disparities.2
For example, U.S. households in the lowest 20% of income spend 10.8% of their total budget on food at grocery stores while those in the highest 20% income bracket spend only 6.8%. As with increased costs for any service or product, those with less experience the greater impact. According to Lusk, the predication of whether current food prices are here for the short or long term is unknown.
Balancing the Reality
Even though the fluctuation of food prices is out of our control, there are some practical ways we can control how and what we buy for the holiday meal (or any time). Consider these tips:
- Don’t go overboard! Even if this is the first time in two years that family or friends are gathering around your table, be realistic about food options and amounts. Leftovers are great but not mandatory. Reducing the amount of food on the table reduces your cost and those “eyes bigger than stomach” temptations.
- Plan your meal with season and sense! Today, we can buy most anything fresh — anytime, anywhere. But from a cost perspective that doesn’t always make sense nor is it the best recipe option. For example, buying fresh broccoli or sweet potatoes instead of frozen and canned options increases the cost and preparation time without a taste benefit.
- Share the cost and “wealth.” Hosting a meal doesn’t mean incurring all the costs. When guests participate, everyone feels part of the occasion. And most importantly, share the “wealth” with others. Consider making a monetary donation to food banks or food pantries. Donations to your state or the national Feeding America program, area emergency shelters and nonprofits will make a difference.
Bottom line, this is not the most expensive Thanksgiving ever but food prices have increased. For some of us, it will barely be a dent in the budget; for others it could be a “game changer.” Regardless of how much or how little food is on your table this year, take the opportunity to share with others, be grateful for all those who worked to grow the food, and celebrate the memories and laughter once again with family and friends — a truly priceless experience.
References
1. “What Is Driving the Increase in Food Prices?” by Jason Lusk, November 12, 2021.
2. “Most Expensive Thanksgiving Ever?” by Jason Lusk, October 26, 2021.
Resources
“Thanksgiving dinner is going to be more expensive this year, thanks to inflation,” CNBC, by Carmen Reinicke, November 12, 2021.