Experts say food prices in Iowa are expected to climb. Here’s why.
Wondering why your groceries are more expensive lately? We take a look at a few factors that have increased food prices in Iowa.
Emery Glover, Wochit
Drake University student Mathany Ahmed hates shopping for groceries — and cooking.
But lately she’s been doing both — and avoiding eating in restaurants — as food prices have climbed 9.4% in April compared to a year earlier, the largest increase since 1981.
The time-starved college student said she doesn’t plan to shop around Des Moines for bargains, with gas climbing to $4 a gallon.
“It’s just not worth it,” said Ahmed, despite adding that she was shocked recently to pay $5 for a dozen eggs.
“I’m just going to eat the extra costs,” said the 28-year-old, a nontraditional student who’s feeling the pinch from food price inflation after recently ending a well-paying internship to focus on her coursework.
The pain at the grocery store won’t end soon for Ahmed or other Iowa consumers. Experts say higher US food prices could continue into 2023, reflecting increased costs to grow, process and transport fruits, vegetables and meat.
Many factors are involved, and some compound the others.
At the core is a strong economy driving demand at a time when Some supplies are tighter and the costs to produce them are higher, experts say. For example, energy costs climbed 30.3% in April compared to a year earlier, the Consumer Price Index shows.
“Just about every piece along the way adds to what consumers pay,” from the costs on the farm to the store, said Scott Brown, a University of Missouri agricultural economist.
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Iowa livestock producers are paying roughly 50% more to raise cattle and hogs now than they did two years ago, said Lee Schulz, an Iowa State University economist.
Prices for the corn and soybeans used to feed cattle, hogs and chickens are nearing record highs. Fertilizer costs in some cases have tripled after supplies from Russia, a leading global fertilizer exporter, came under sanction following its invasion of Ukraine.
And the price of diesel fuel for tractors and the semis that transport food has risen 75% from a year ago to roughly $5 a gallon, the AAA Gas Prices website shows.
Ahmed said she’s cutting back on more than dining out. She trimmed her clothing and travel budgets and downsized her living space after seeing less interest from visitors in renting out her extra room through Airbnb.
That helps her afford a few luxuries, like buying chocolate-covered strawberries and fresh-cut flowers at the Des Moines Downtown Farmers’ Market. Unlike grocery shopping, “it’s a joyful, fun thing to do,” she said.
Labor also in short supply, driving up costs
Telma Cruz, a United Food and Commercial Workers union steward at the JBS pork plant in Marshalltown, said the company’s two shifts of workers take turns logging overtime to keep supplies flowing.
With companies in Iowa and Midwest begging for employees, “There’s not enough workers,” Cruz said through an interpreter.
The competition for workers has pushed wages higher, between $2.50 and $5 more an hour since 2021, depending on their job, said Cruz, who has stayed with JBS, believing its wages and benefits are the best.
Mark Lauritsen, the UFCW’s vice president for meatpacking, said he estimates each meatpacking company in Iowa needs another 200 workers to keep pace with demand.
Lauritsen said some plants are running 10 hours a day, six days a week, to do the same amount of work fully staffed company operations would do in five days. “That adds to the costs per pound,” he said.
The Biden administration also points to reduced competition resulting from consolidation in the meatpacking industry. Tyson Foods, Cargill Inc., JBS and National Beef Packing Co. slaughter about 85% of the nation’s cattle and 70% of its hogs.
Meat and poultry had the sharpest increases among home food purchases, climbing 14.3%, the largest 12-month increase since 1979, the Consumer Price Index showed. The price for beef roasts, for example, spiked nearly 17% higher in April compared to a year earlier.
More: To tame inflation, Fed raises key interest rate
Biden has called for an investigation and plans to invest $1 billion to boost competition, providing grants and other financial support for smaller regional processing plants that could diversify the industry and make it less vulnerable to disruptions.
And this week, Biden called for increased safety nets for farmers who grow two crops in one season as well as increased investments in domestic fertilizer production.
US Sen. Chuck Grassley, an Iowa Republican, is among lawmakers calling for meatpackers to increase cash purchases of cattle to add price transparency in local markets. More and more, packers buy cattle — as well as hogs, chickens and other livestock — under private contracts.
Meatpacking CEOs said in congressional hearings last month that it isn’t industry consolidation but increased labor costs, tighter supplies and higher energy costs that are driving consumer prices higher.
A dozen states posted record low unemployment rates in March, the most recent data available, the US Bureau of Labor Statistics reported. The nationwide unemployment rate for April was 3.6%, nearly matching the pre-pandemic low.
Tyson CEO Donnie King told lawmakers that the Arkansas company spent $500 million to boost pay and provide bonuses for workers during the pandemic and is testing on-site child care and health care for employees. It’s also offering free high school classes and advanced educational opportunities.
Lauritsen said Tyson and other large meatpackers will need to pay even more, look for ways to make the work less physically taxing, and focus on retirement packages if they hope to attract and retain workers in a hot labor market.
Tyson said it has boosted pay to about $50,000 annually.
“Workers today can make a decent living” processing meat, Lauritsen said. “But It’s hard work.”
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Farmers hold back on livestock production; costs are questioned
Another reason food costs are rising: There isn’t enough livestock to meet demand.
Supplies of cattle and hogs have each declined about 2% compared to a year ago, two US Department of Agriculture reports show.
One reason: A prolonged drought in the high plains and western US is burning up pastures, forcing producers to sell cattle to avoid the elevated cost of feeding them, said Brown, the University of Missouri associate economics professor.
“That’s certainly impacting our ability to maintain herd inventors,” said Schulz, the ISU associate economics professor. “We’ve seen a lot of culling of beef cows.”
Cow-calf herds also are declining. Strong market prices are prompting producers to sell, he said.
“We’re going to see reduced cattle inventors moving forward,” he said.
And while strong prices for hogs, nearing highs set in 2014, should be signaling to producers to expand herds, high feed, labor and fuel costs are causing them to wait, he said.
Profits hit record highs eight years ago, Schulz said, but they’re slim this year, given high production costs. “Producers don’t just respond to price. They respond to profits,” Schulz said.
Farmers are worried about where costs will go, Brown said.
“They’re facing $7.50 corn. Uncertainty in labor. Uncertainty with processing. The volatility makes them pause and wonder if now is the right time to expand,” Brown said.
Consumers try cost-saving strategies
Nancy Johnson, shopping at the Des Moines Downtown Farmers’ Market during a visit from her home in northwest Iowa, said she believes that families weigh a variety of factors when they look at food prices.
More: ‘It didn’t feel like $80 worth of food’: Inflation is making it hard to make healthy food choices
For example, her son’s family pays for a food subscription that delivers all the ingredients needed to make meals at home. It costs more than going to the grocery store, but they waste less food — and money — with the better proportioned meals, she said.
“People want to eat better, take care of themselves,” Johnson said, adding that she feels lucky to have a strong local grocery store in Holstein, a town of about 1,700 people in Ida County, as well as local farmers markets.
Some even drive roughly 50 miles to Sioux City so they can shop at warehouse chains like Sam’s Club.
“People are going to pay more, no matter where they shop,” she said.
Donnelle Eller covers agriculture, the environment and energy for the Register. Reach her at firstname.lastname@example.org or 515-284-8457.