Thanksgiving feasts return in force but at a more expensive price

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Thanksgiving feasts will be back again in the US after the pandemic disrupted them last year. But Americans will be paying more to celebrate when they gather around dinner tables this Thursday.

Led by jumps in prices for wheat, turkey, potatoes and corn, the prices of food commodities typically included in a Thanksgiving dinner were on average 25 per cent higher than pre-pandemic levels in 2019, a Financial Times analysis shows.

The cost of travelling to see family and friends is also higher, with the US price of petrol up more than 50 per cent since the start of the year.

Strong inflation has become a drag on consumers and a challenge for the White House and the US Federal Reserve. President Joe Biden on Tuesday sought to tame rising prices as his administration announced plans to release 50m barrels of government oil stocks into energy markets.

Food inflation in the US is running at about 5-6 per cent year on year, compared to about 1.3 per cent annually in the past decade, said Jayson Lusk, professor of agricultural economics at Purdue University in Indiana. “The rate of food inflation is certainly much higher than what we’ve been accustomed to,” he said.

Rising food costs have several causes, Lusk said. The fiscal stimulus undertaken in response to the coronavirus boosted domestic US consumption, while international food demand has been brisk.

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Droughts and inhospitable weather have reduced harvests, while some farmers have been wary of increasing production because they were unsure over the effects of the pandemic. Wages have climbed for workers in food-related sectors including meat processing, transport and retail sales, adding to costs.

The American Farm Bureau Federation, a Washington lobby group, estimates the average retail cost of the Thanksgiving turkey dinner will rise 14 per cent this year.

At the centre of the plate, turkey prices were 34 per cent higher than the 2019 average, based on data from the commodity research group Mintec. When producers were making plans about this season’s turkey flocks, in late 2020 and early 2021, they hesitated over uncertain demand, said Eduardo Gonzalez, analyst at the agricultural commodity research firm Gro Intelligence.

As a result, US frozen whole turkey inventories in September were at the lowest in 37 years for the month, according to Gro Intelligence. The customary build-up of frozen inventories before Thanksgiving did not materialise due to low turkey production as well as labour shortages.

Line chart of Rebased commodity prices, average for a selection of raw ingredients used in a traditional meal* (2019 = 100) showing Thanksgiving dinner gets more expensive

Production of grains and vegetables was hit by extreme drought in various areas of the US. Wheat prices soared 66 per cent compared to the 2019 average, propelled by poor conditions in the US as well as leading growers such as Russia and Argentina.

Carrot prices were up 34 per cent compared to the 2019 average. Water shortages and irrigation restrictions on the US west coast hit carrot production, while potato prices rose 13 per cent price due to the lack of deep soil moisture in key growing areas such as Idaho, according to Mintec.

Americans will shell out more for Thanksgiving dinners at a time when US consumer prices are escalating more broadly. The consumer price index, which was published by the Bureau of Labor Statistics earlier this month, jumped 6.2 per cent in October — the fastest annual rise since 1990 — and showed clear signs that inflation is picking up across wide swaths of the US economy.

Line chart of $ a US gallon showing American petrol prices have climbed to a seven-year high

On top the price for the dinner, travelling during the holidays will be more costly with petrol prices above $3 a US gallon ($0.79 a litre) for the first time since 2014. President Biden on Tuesday said that consumers were “feeling the impact of elevated gas prices at the pump and in their home heating bills” as he linked the release of strategic oil reserves to curbing inflation.

While this year’s buoyant demand and higher prices may encourage farmers and meat producers to increase output, economists warn that food prices may remain high well into next year. For example, the price of chicken wings — a popular treat at gatherings for the Super Bowl football final in February — is still 50 per cent higher than the 2019 average, though down from this year’s peak in June.

“There is all the pent-up demand, and everyone is coming to the bars and pubs and eating chicken wings,” Gonzalez said.

Line chart of Rebased prices (2019=100) showing US chicken wing prices jump

High shipping and freight costs, strong prices for natural gas used to make fertiliser, and persistent labour shortages are likely to keep food inflation high, said Tom Bailey, senior consumer foods analyst at Rabobank.

“We could see some reduction in demand and an improvement in the supply chain situation, but the underlying issues will make their way into crop prices and feed prices,” he said, adding that many manufacturers and retailers have been holding back on passing costs fully on to shoppers until now.

Next year’s Thanksgiving dinners could bring further increases in prices, he said, noting: “We could say that 10-20 per cent [rise for Thanksgiving dinner] is something we can be thankful for in terms of what we might be paying next year.”

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