Food Processors Struggle With Inflation

May 11, 2021
Food processors are facing higher prices for many of the goods and services they have to buy.

Food processors are facing higher prices for many of the goods and services they have to buy, and many of them are saying they plan to pass those along to customers.

The Producer Price Index from the U.S. Bureau of Labor Statistics, which tracks more than 1,500 commodities, is up 4.2% year-over-year in March, its largest increase since 2011.

Corn prices are up about 50%, with a bushel costing more than twice what it did last year, according to the Wall Street Journal. Soybeans are also up, along with other grains, sugar and other commodities. Packaging materials like plastic, aluminum and paperboard are also costlier.

Labor is rising too. According to the Consumer Brands Association, wages in food manufacturing went up 3.4% in the third quarter of 2020 compared with the previous year; some of that comprised bonuses and overtime pay deriving from the pandemic. Shipping costs are also up, due to a shortage of truck drivers and a blip in gasoline prices.

“The increased costs to make and ship CPG products have been edging up for a year,” Geoff Freeman, CEO of the Consumer Brands Association, said in a statement. “The industry has absorbed as much cost as it could manage, but it has reached a breaking point after more than a year in a relentless demand cycle.”

Some processors are reacting by stating or at least suggesting that they will be raising prices, including General Mills, Hormel Foods and J.M. Smucker.

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