Supply chain shocks drive protein price increases

The COVID-19 global pandemic stressed the poultry supply chain, fueling consumer food prices to their highest levels in 13 years.

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The COVID-19 global pandemic stressed the poultry supply chain, fueling consumer food prices to their highest levels in 13 years.

“What we saw is that there was a big jump in food prices immediately after the onset of the pandemic,” Jayson Lusk, Distinguished Professor at Purdue University and food and agriculture economist, said during Sticker Shock - Rising Prices and Food Chain Impacts.

One year later, food prices remain 2.4% higher than they were in June 2020. 

Part of this price increase is due to a reallocation of where people are spending their food dollars. During COVID-19, consumers shifted most of their spending from foodservice to retail. But challenges related to warehouses, transportation and shipping also contributed to increased prices.

“The food chain is stressed in a way that I don’t think I’ve ever seen,” added Sarah George, senior vice president of fresh foods at Costco Wholesale, and Lusk’s co-presenter.

“It’s not just commodity or labor, but it’s the labor at every single step along the supply chain compounded with work delays.”

Shutdown effects are still being felt

Temporary shutdowns in meat and poultry processing plants in 2020 due to COVID-19 outbreaks also pushed up prices, Lusk said.

“Even though we don’t have these same issues today, workers are still being socially distanced. Plants had to adopt some safety practices that add an extra cost to the system,” Lusk explained, noting that these factors continue to drive up costs.

Labor challenges

Labor shortages were already a challenge for the poultry industry pre-pandemic. COVID-19 exacerbated the situation. 

There is a lot of debate as to why these labor shortages are occurring and many attribute it to increased unemployment benefits during the pandemic.

“Not everyone buys that argument,” Lusk said. “Some say there’s just a reallocation where labor is needed in the economy and it just takes a while for people to get from where they were to where they are needed now.”

Costco has a unique thought process when it comes to labor, George explained.

“Sometimes high labor values can create stability in a market. If you give people good jobs and you pay them well then, they actually stay there. This actually reduces your labor costs over time, although it’s not always easy in the short-term,” she said.

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