UNITED STATES - As the Wall Street Journal recently reported, inflation has risen to a four-decade high. In June, the annual rate was 9.1 percent. Prices are up across nearly every industry, and it is especially apparent in ours. Increasing inputs and supply chain challenges are making things even more difficult for grower/packer/shippers, so I spoke with a few industry members to glean some insights on what they’re seeing.
“By spring 2022, many of our members reported anecdotal increases of 18–30 percent on inputs across the board,” Dante Galeazzi, President and Chief Executive Officer of Texas International Produce Association, shared with me. “Fuel, labor, chemicals, packaging materials, seeds—nearly every input used in the operations to grow, pack, sell or move fresh produce has increased.”
With that in mind, reports have shown that fresh produce prices have only increased 8–11 percent at the registers.
“Even without knowing how much of that price increase at the stores is reaching the farmer, there’s still a disparity between the increase to the consumer and costs increases faced by growers and shippers,” Dante continued.
Considering this, I asked Dante if perishability plays a factor in price, and he answered with a resounding yes.
“The answer is absolutely. While it is not the only factor, it certainly plays a role. Unlike widgets that can be stored or delayed until prices are more favorable, fresh produce unfortunately does not have that option,” he explained. “And once the product is harvested or packed, it has to move, which puts further pressure on certain commodities.”
I also spoke with Joe Watson, Vice President of Retail for Foodservice and Wholesale, International Fresh Produce Association, to learn a bit about the effect seen at retail.
“Certainly perishability factors into pricing. From a pricing perspective, the past year and a half is when inflation really started to hit hard, especially in the fruit category,” Joe noted. “But there are some categories that have been almost insulated from this, such as berries. Berries have continued to outperform year over year, and what’s more perishable than berries? It just goes to show the power of the berry category and how consumers are strong supporters of it.”
Joe also remarked on reporting that indicates retailers are sizing down and becoming a bit more flexible with their specs in certain categories.
“They’re maybe offering a secondary option or switching to a different size. Not necessarily giving up on quality and grade, but making decisions to keep shoppers in certain categories—and sometimes that means giving up a little bit of size,” Joe explained.
I turned back to Dante with a final question, asking him whether or not perishability factors into the discussion of inflationary impacts on produce pricing.
“It’s tough to say, but I suspect it impacts certain commodities more as opposed to others. In my opinion, I believe produce pricing at the store level is going to be a slow crawl up, similar to many items at retail. Meat, dry goods, dairy—they’ve all experienced increases. Will pricing reach commensurate levels compared with what our industry is paying to produce these goods? We certainly hope so, and the sooner, the better,” he concluded.
Stick with us for further reporting on this topic.
