It’s that time of year when folks begin speculating and estimating the cost of the annual thanksgiving meal. Like so much of life over the past several months, these calculations and even Thanksgiving itself is likely to be “different.” The most commonly cited and reliable source of publicly available data on food prices comes from the Bureau of Labor Statistics (BLS), which collects prices to compute the Consumer Price Index (CPI). However, if one travels over to the BLS website, a surprising result emerges: the BLS hasn’t reported retail turkey prices since February before the COVID-19 disruptions began.
What’s going on? In an August report, the BLS explains.
“To measure price change for food at home, BLS collects data from thousands of grocery stores and other establishments that sell grocery food items. … these prices have traditionally been collected in person by hundreds of trained BLS data collectors in the field. …
In 2019, about 99 percent of food at home prices were collected via personal visit. In June 2020, typical of recent months, about 96 percent of the prices were collected online, with the remaining 4 percent collected via telephone.
While BLS adapted collection procedures for the CPI by shifting to online price collection, some complications were encountered. Some grocery stores had prices available online, others had prices available only through a third party, and some had no online prices available. For some stores, there was even a queue for accessing their website. The availability of many items also decreased as demand surged.
These logistical and market impacts resulted in a decrease in the total amount of prices collected. …
A reduced number of prices collected is not the only issue that complicates price-change measurement for food at home during the pandemic. For some stores in the sample, an item’s online price may be different from, and often higher than, the in-store price for the same day and time. This difference was one of the factors that led to an increase in the food at home index from March to April 2020, because in some cases, online prices were compared with prices previously collected in store.”
So, while we’re not exactly comparing apples to oranges, we are now comparing in-store apple prices to online apple prices. Still, with that caveat aside, here’s what we can gather about the cost of thanksgiving 2020.
Without retail price data, what can we say about the price of the centerpiece of the thanksgiving meal? Fortunately, the USDA reports movements in wholesale turkey prices, which might give us a clue. Averaging over frozen and fresh toms and hens, wholesale turkey prices are, at present, about 15% higher now than they were last November and about 30% than they were in November of 2018.
It’s not just turkeys, grocery food prices, pretty much across the board, have experienced significant price inflation over the course of the past several months. According to the BLS, retail grocery prices shot up 2.6% from March to April 2020; this was the largest monthly change in the food at home consumer price index since the 1970s. Why? COVID-related disruptions led to a run on grocery stores as consumers avoided restaurants and sought to stock up and fill pantries and freezers. All that extra demand at grocery pulled up prices. Then, in April and May, shutdowns and slowdowns in beef and pork processing due to worker illnesses reduced the supply of meat products available, leading to a significant price increase for beef and pork.
While many of the food prices have come back down off the spikes in late spring and early summer, it remains the case that retail food prices are significantly higher now than at the same time last year. In October (the last data available), the BLS reports prices of food at grocery were 4% higher than the same time last year. It’s been almost a decade, since 2011, that we observed this rate of annual food price inflation. Despite the restrictions on eating out, the price of food away from home is also 3.9% higher in October 2020 than in October 2019; this year-over-year change is higher than has been observed in at least a decade.
Fluctuations in meat, dairy, and egg prices have been the biggest drivers of the overall food price hike. In June 2020, prices of these products at grocery were 12.8% higher than the same time in 2019; as of October 2020, prices of these products are still running 6.1% higher than in 2019. However, the price increases are not just limited to meat and animal products. Cereal and bakery product prices are 3% higher in October 2020 compared to October 2019; Fruit and vegetable prices are 2.6% higher in October 2020 than in 2019.
These year-over-year increases are significantly higher than historical norms. From 2000 to 2019, the average annual change in retail grocery prices was only about 1.9%. In fact, throughout much of 2015 and 2016, retail grocery prices actually fell relative to the year prior.
Back to thanksgiving, there are a variety of new factors affecting the cost of the annual meal. First, there is likely to be less travel, and thus less eating out. This means one will need more food at home (and thus food purchased at grocery) than is typically the case - factors which might pull up grocery prices. However, less travel means fewer large gatherings of people at any given meal. Do you really need a 20lb turkey if all the extra family isn’t coming to visit? Consumers may choose a smaller-sized young turkey at 10lbs or perhaps even a whole chicken at 5lbs. While the per-pound prices are typically similar across these different birds, the overall cost is obviously lower if fewer pounds are purchased. An article last month in the New York Times discussed some of the uncertainty surrounding turkey sizes and turkey demand demand.
There have been increasing numbers of COVID-19 cases in many parts of the country in recent weeks. Might this lead to food supply chain disruptions like the ones earlier in the year? I doubt we’ll see the same kind of widespread emptying of grocery shelves we witnessed back in March. Much of that was caused by the sudden shift in demand away from restaurants and cafeterias toward groceries. The food system has largely sorted through those demand shocks and has adjusted to the now much larger volume of purchases occurring through the grocery channel. It is still possible to have some disruptions if a spike of COVID-19 cases affects grocery cashiers or stockers, but these are likely to be localized disruptions. It is also possible that, as in April and May, workers in food processing or packing plants might experience a rise in cases, leading to shutdowns, which would adversely affect the supply of meat and processed food products. My sense is that meat packers are much better prepared this time around and have better precautions in place. While it is certainly possible we may have some meat packing plant shutdowns still in store, I’m optimistic we won’t see the same kind of system-wide disruptions we experienced in April and May.
Finally, at least in the case of turkeys, the meat industry has probably already produced much of what we’ll eat this thanksgiving. The turkeys have already been processed and are sitting in cold or frozen storage. There is a cyclical, annual pattern of turkey (and ham - another holiday favorite) storage; USDA data show that warehouses fill to the brim with hams and turkeys in August and September and then empty out in November and December with the holidays hit.
Overall, we can probably expect a more expensive, more socially distanced holiday. Nonetheless, and in spite of all the craziness in 2020, I suspect we can all still find something for which we can be thankful.