This holiday weekend marks the unofficial start of the grilling season. Inflation looks to make an impact at all levels, but how consumers respond with protein choices will be an anticipated response and an early indication of how rising costs may affect us at the counter this summer. The Bureau of Labor Statistics claims the Consumer Price Index rose 8.3 percent over this time last year while the cost of food has risen 9.4 percent. Consumers will only be able to handle so many hikes so quickly before pushback will take place.
According to USDA, beef cattle slaughter rose 3.5 percent week over week in anticipation of the grilling weekend. WLJ is anxious to see the numbers come in and see how our industry held up in comparison to other proteins. Chicken and ground beef were both experiencing a 16 percent price increase over last year’s Memorial Day prices, and we anticipate those numbers to hold steady. Even hot dogs are over $2/pound higher than they were a year ago. According to Trading Economics, poultry, pork and beef all stayed relative in their year-over-year increases in price, with the exception of eggs taking a 165 percent increase over last year at this time. The national average for a gallon of conventional 2 percent milk has now surpassed $4.01/gallon.
We are simply dealing with factors from every angle imaginable at the moment. Grocery bills are catching shoppers off guard daily, and price increases to adjust for inflation are happening on a daily basis. Consumers are going to continue to be hit until inflation can be stalled and hopefully before a full recession takes hold. Salaries aren’t keeping up with these hikes, as businesses simply can’t keep up with the pace.
A rally for feeder cattle going into the summer video sales should alleviate some producers’ pains for the rising costs across the board, but the smaller producers are going to have to be creative in their management and marketing to make ends meet. For now, the increase in bull and cow slaughter prices have helped producers to offset some prices in the short term.
Supply chain issues are slowly but surely getting caught up, but it’s going to take a lot more time. The labor market is simply too strong and is pulling people in many directions, and employers are fighting for labor and driving up entry level pay. Currently, there are two available positions for every unemployed person. Voluntary resignations continue by the millions each month as people are finding better jobs more quickly.
We hear a lot of questions as to where our labor force went. In my opinion, they went in two directions: different work and retirement. The pandemic left so many people in various situations, and it gave a lot of people the reason to chase other pursuits. Many employers expected their employees to be waiting for them when the initial brunt of the pandemic passed, but they still haven’t found them yet.
In fact, there were an additional 4.4 million business license applications in 2020 over what historical numbers supported. People went out and started their own businesses. Couple this with the 30 million retirements reported in just one quarter in 2020—an increase of 3.2 million over normal numbers—and you have a snowball effect of a shortened labor force, fast inflation, supply chain interruptions and simply less people to do the work.
We don’t see inflation slowing down under our current circumstances. Many of our readers have seen a tough spring on input costs: fertilizer, fuel, seed, hay and just about every input cost increasing by a substantial amount will result in less net dollars come the end of the year. Without question, most producers will be tightening their hatch this season, but the silver lining is producers have a powerful cow herd moving forward. There are currently several bills in legislation right now that all center around protein pricing, packer fairness and competition promotion that continue to beat the drum for producers.
The cow herd that has been maintained after a multiyear increase in the culling of cows and bulls is poised to raise calves that will have an enormous value to our nation. The object of the game right now is to stay in it. Perseverance will be key as our national economy finds solid ground. We truly feel the producers who are taking on this turbulent time are poised to be rewarded for their efforts. — LOGAN IPSEN
