Reasons Behind Recent Price Spikes
February 9th, 2023
In December 2022, the price of a dozen large eggs was $1.79. In December 2023, it rose to more than double that, at $4.25. While inflation has eased over the past few months, food inflation is here to stay. Whether due to supply chain or environmental issues, the result is clear: the price spikes are colossal, and the new ones seem to have set the new standard.
Let’s start with the supply chains.
The war in Ukraine has drastically impacted exports of kitchen essentials, such as wheat, sunflower oil, and other produce. Ukraine and Russia combine to export over half of the world’s vegetable oils, while Ukraine exports 36% of the world’s wheat. As sanctions on Russia and supply chains in Ukraine have massively hindered the ability for the countries to export goods, prices have gone up as a result of the lowered supply.
Furthermore, environmental factors continue to play a large role in curbing food supplies. For example, the drought in the Western portion of the United States has lowered crop yields. Studies have shown that the current megadrought is the worst of its kind in the last 1,200 years. Farmers have been encouraged to grow crops unlike their usual rotation in order to conserve water use. Beyond climate disasters, diseases like the deadly avian flu have also affected millions of birds that have disrupted the supply of poultry and eggs from commercial farms and contributed to higher consumer costs.
Finally, food prices had already begun to rise during the pandemic, where customers stocked up on food from grocery stores, prompting higher demand and higher prices. Restaurant prices have also risen as a result of these already inflated prices, prompting customers to cook at home. This has had a counterintuitive effect, with the rise in the demand of groceries leading to higher prices. Gregory Daco claims that we are “..left with this environment where prices are elevated on both sides, and you’re seeing supply constraints.”
Experts have posited that there will be a slow down in price rises this year, with falling global food commodity prices trickling down to prices at the grocery store and supply chain issues easing over time. This, coupled with the de-escalation of the Ukraine war could potentially bring prices down in the long run. There is hope for change, but all we can do is wait.