Thanksgiving is back in effect, but at a more expensive price

Thanksgiving will return to the United States later epidemic broke them last year. But Americans will pay more to celebrate when they gather around the dinner table this Thursday.

Led by soaring prices of wheat, turkey, potatoes and corn, prices of food items commonly included in Thanksgiving dinners are on average 25% higher than pre-pandemic levels in 2019, a Financial Times analysis shows.

The cost of traveling to see family and friends is also higher, with gas prices in the US up more than 50% since the start of the year.

Strong inflation has become a drag for consumers and a challenge for the White House and the US Federal Reserve. President Joe Biden on Tuesday sought to rein in rising prices as his administration announced the plan release 50m barrels government oil reserves into the energy market.

Food inflation in the US is running at about 5-6% annually, compared with about 1.3% annually over the past decade, Jayson Lusk, professor of agricultural economics at Purdue University in Indiana. “The rate of food inflation is certainly much higher than we are used to,” he said.

Lusk says the rising cost of feed has a number of causes. NS financial stimulus Taken in response to the coronavirus has boosted US domestic consumption, while international demand for food has grown rapidly.

Drought and extreme weather have reduced harvests, while some farmers are wary of increasing yields because they are uncertain about the impact of the pandemic. Wages have increased for workers in food related fields including meat processing, transportation and retail, which adds to costs.

The American Farm Bureau Federation, a Washington-based lobbying group, estimate The average retail cost of a Thanksgiving turkey dinner will increase 14% this year.

At the center of the table, turkey prices are 34% higher than the 2019 average, based on data from commodity research group Mintec. Eduardo Gonzalez, an analyst with agri-commodity research firm Gro Intelligence, said that when producers were planning on flocking turkeys this season, in late 2020 and early 2021, they hesitated before. uncertain demand.

As a result, US frozen whole turkey stocks in September were at a 37-year low for the month, according to Gro Intelligence. The practice of stockpiling frozen inventory before Thanksgiving didn’t materialize due to low turkey production as well as labor shortages.

Line chart of Average Merchandise Prices for a selection of raw ingredients used in a traditional meal * (2019 = 100) showing Thanksgiving dinners getting more expensive

Grain and vegetable production was affected by extreme drought in various regions of the United States. Wheat prices are up 66 percent from the 2019 average, fueled by poor conditions in the US as well as top growers like Russia and Argentina.

Carrot prices are up 34% from the 2019 average, according to Mintec, water shortages and irrigation restrictions on the US West Coast have affected carrot production, while potato prices are up 13%. due to a lack of deep soil moisture in important growing regions like Idaho, according to Mintec.

Americans will spend more on Thanksgiving dinner at a time when consumer prices in the US are climbing more broadly. The consumer price index, released earlier this month by the Bureau of Labor Statistics, jumped 6.2% in October – the fastest annual increase since 1990 – and shows clear signs that inflation is picking up across the US economy.

Line chart of US dollar a gallon showing US gas prices climbed to seven-year high

In terms of dinner prices, traveling around the holidays will cost more with gas above $3 a gallon ($0.79 a liter) for the first time since 2014. President Biden on Tuesday says that consumers “feel the impact of rising gas prices at the pump and in their home heating bills” as he links the release of strategic oil reserves with curbing inflation.

While surging demand this year and higher prices may encourage farmers and meat producers to increase output, economists warn that food prices are likely to remain high next year. For example, the price of chicken wings – a popular dish at gatherings for the Super Bowl football final in February – is still 50% above the 2019 average, although down from its peak. this year in June.

“There was all this pent-up demand, and people were going to bars and pubs and eating chicken wings,” says Gonzalez.

The Resale Price (2019 = 100) line chart shows a spike in the price of US chicken wings

Tom Bailey, senior analyst for consumer foods at Rabobank, said shipping and freight costs are high, the price of natural gas used to make fertilizer is soaring and labor shortages are high. is likely to keep food inflation at a high level.

“We could see demand fall and supply chain conditions improve, but fundamentals will affect crop and feed prices,” he said, adding that Many manufacturers and retailers have tried to reduce costs altogether. for shoppers until now.

Next year’s Thanksgiving dinner could drive prices up even further, he said, noting: “We might say 10-20% [rise for Thanksgiving dinner] is something we can be grateful for in terms of what we might have to pay next year. ”

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