Inflation, after a hiatus of nearly 45 years, has become a central concern to Americans again.
The causes of inflation always seem to be a bit obscure: there is always a culprit, but this culprit can easily point to another culprit. I’ve raised my prices? But all of my suppliers have raised their prices too.
Eventually the buck stops with the Federal Reserve, the spending boom as a result of Covid relief payments, and other causes that, singly and in combination, do not nevertheless amount to a full explanation.
In any case, the cost for “all items increased 7.7 percent for the 12 months ending October,” reports the Bureau of Labor Statistics.
In mid-October, it cost the typical U.S. family an extra $445 to buy the same goods as it would have last year.
Certain companies have been able to raise their prices to meet their increased costs—and then some. Goldman Sachs analyst Jason English observed this summer that Conagra Brands, owner of brands like Slim Jim and Duncan Hines, has priced its products above inflation rates recovering its profit margins.
Chipotle has increased prices twice this year, while taking in approximately 13% more revenue year over year.
“The index for food away from home rose 8.6 percent over the last year,” reports the Bureau of Labor Statistics. “The index for full service meals rose 9.0 percent over the last 12 months, and the index for limited service meals rose 7.1 percent over the same period.
The food at home index rose 12.4 percent over the last 12 months, which may explain why some consumers are turning to fast-food chains to save on costs.
To focus on produce, in September “fresh produce prices were also up from last year, at +9.3% level on a per-unit basis and +9.8% on a per-pound basis,” said Anne-Marie Roerink in The Produce Reporter. “This is far below the total store average.”
To put it another way, the consumer price index for fruits and vegetables was at 317.4 in October 2021 and 347.1 in October 2022 (the index: 1982-1984=100, seasonally adjusted).
This eased a bit in October, when total prices for fruits and vegetables fell 1.5 percent over the previous months.
Reflecting more on this leads us into the rough terrain of price elasticity, or the degree to which supply and demand affect each other.
We are currently seeing this play out in Salinas Valley lettuce, which has been hit badly this season by Impatiens necrotic spot virus (INSV) and Pythium wilt.
One estimate says that 20 percent of Salinas Valley acreage this year has been affected by the diseases. That acreage has seen crop losses by as much as a third.
Consequently, lettuce growers are seeing prices as high as $90 per box. One recent estimate, from November 9, is $73.25 a box. Some restaurants have said that they are unable to buy lettuce.
The shortage is expected to last several more weeks, when desert lettuce begins to come on the market.
We can hope that the shutoff of irrigation water to the Yuma Valley will not drag this shortage out further into the season.