Dr. Dawn Thilmany: Grocery costs
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Public perceptions of food costs appear to have influenced the recent presidential election, and grocery bills are again likely to be top-of-mind for many Americans as Thanksgiving approaches.
On Monday, November 25, 2024, SciLine interviewed: Dr. Dawn Thilmany, a professor of agricultural and resource economics at Colorado State University. See the footage and transcript from the interview below, or select ‘Contents’ on the left to skip to specific questions.
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Introduction
[0:00:19]
DAWN THILMANY: Hi, I’m Dr. Dawn Thilmany. I’m a professor of agricultural and resource economics here at Colorado State University, and in addition, I currently co-direct the Northwest and Rocky Mountain [Regional] Food Business Center in cooperation with the USDA. Over my career, I’ve studied a lot about the dynamics of consumer and food and agricultural markets, including how it kind of dovetails with some of our rural development goals for Colorado and the United States.
Interview with SciLine
Could you share some insights on recent food price trends?
[0:00:54]
DAWN THILMANY: Over my 30 year career, this has probably been the most dynamic five years for food prices we’ve seen, and that’s really telling, because 30 years is a long time, and food is one of the most important markets to most people because it’s pretty much the most frequent purchase we make in most U.S. households.
What are the main factors driving grocery costs for consumers since the pandemic?
[0:01:21]
DAWN THILMANY: Really the biggest change has been labor cost. So people might not know this, but about 50% of the cost of food that we eat is labor in some way, shape, or form. And as a country, we’ve actually made some commitments to really raise wages for a large set of our workers. And since 50% of our food cost is labor, that’s going to end up trickling through to our food costs as well. So most people would think that plays out well, because if we’re all making more money, we can spend more money on food. But of course, that hasn’t been even across the economy. But there’s a couple other things, too. Those supply chain disruptions also affected energy costs, which are big for agriculture. We also have seen some weird versions of disease outbreaks that I believe affected a couple of sectors. The most notable one is avian influenza, that have affected turkeys and eggs, and in this time of year, those are a couple of the ingredients we should think about.
Why have grocery prices risen faster than other costs since the pandemic?
[0:01:32]
DAWN THILMANY: We just have a lot of labor embedded in our food. To raise a good crop or raise livestock, and to turn it and transform it into the food we want to put on our tables, it just takes a lot of hands and a lot of labor. And we have seen labor costs go up pretty significantly during this time, too. So again, that’s great news for people whose earnings have gone up, but we certainly know that’s not even across the economy. And an average worker has their earnings up, but there’s a lot of people who either already retired and on fixed incomes or who are in sectors that have not seen those wage increases, and they’re feeling the pain the most. The other thing I would say about food is that we’ve certainly had some international trade disruptions, supply chain disruptions, and even what’s still going on in the Ukraine. And all of those are pretty big drivers of supply for our food system. And again, even if we can find a strategy to address those, it usually takes us six, nine, twelve months to figure out that new strategy. And food production takes a whole season for most crops. So it just—there’s always a lag time between when we figure out there’s something driving up prices and how we figure out a strategy that will mitigate those price increases. And for agriculture, that’s always very true because you just can’t go make another apple tomorrow. That’s a whole production year to get a new apple on the tree.
What do you say to people asking when food prices will return to normal?
[0:03:48]
DAWN THILMANY: I tell people they might need to get used to there being a new normal for food prices. So we are definitely going to see inflation continue to flatten out unless something significant happens on the supply side again, but I don’t think we’re ever going to see a reversal back to prices people say they were used to. There may be a couple small pockets of food products, particularly in those nonperishable parts of the food aisle where you don’t have seasonal disruptions be quite as important, where things might get a little bit more back to normal—quote, unquote. You know, canned beans if you’re making chili, or maybe some bread products. But I think we’re actually probably where we are going to be for normal, for now. And I know that’s requiring people to make a lot of adjustments, but if you really go and look at—when we go to the calculations again as economists—of the share of people’s budget they’re spending on food dollars, it’s not terribly different than five years ago. So again, I think that just leads us to: It just doesn’t feel normal to people because it is the one price tag we see so frequently, similar to gas. Whereas the other things, when the prices go up, we don’t see the fact a car price went up till five years from now, when we buy our next new car. Food prices, you see the immediate effect because next time you’re in the store, you see them go up. So food price inflation, it turns out, just has a psychological effect. We didn’t know it was going to be so jarring to folks. But it’s also because we haven’t had this level of inflation since the 1970s. And most people who are now adults buying food were not buying food in the 1970s.
What impact would U.S. tariffs on food products have on costs and food systems?
[0:05:52]
DAWN THILMANY: Tariffs are a really interesting question because this is definitely a case where there’s winners and losers. The winners, if we bring in tariffs, are all of our local agricultural and food sectors who have had trouble competing on the global marketplace because we do, on average, treat our workers better, pay them better, give them better benefits and accommodations. So when we’re trying to compete in a world market with countries that don’t have those policies yet, it’s been really hard for our food and agricultural industry to compete. So, for them it might be good news. But even for them, there’s some challenges because maybe some of the inputs they use for their products, maybe the tin cans they use to put their green beans in or the packaging they use to put their beef products in come from a foreign country. So, they’ll even see some price increases themselves. The real challenges for all those crops that we know we have to import. We are just never going to be big producers of coffee or pineapple or avocados, with the exception of California. So, where we’re really going to see that affect the prices we see in the food stores is for all of those products we’ve become dependent on global markets for because we have to import them and there’ll be tariffs on them. That’s only if those tariffs are well received in the global marketplace. What I’m really worried about is if there’s retaliation and some of the trading partners who feel like those tariffs are not fair to them start changing their game rules and making it hard for either our products to make it to their countries or even more expensive for their products to make it to our countries. That’s where I think the trade economists I work with really worry about is if this scales up into retaliation, where it’s not just the tariffs themselves but other political shocks that this might cause, then there’s some real worry.
Is there anything else you’d like people to know about food in the United States?
[0:07:53]
DAWN THILMANY: This country eats really, really cost effectively, really high-quality food, that most of the world is completely jealous that we have access to. So as much as I I understand why people are feeling this in their pocketbooks, I also always tell people to think and reflect about how lucky we are as a country that we made a set of policies to always keep our farm sector and ag sector strong, and that this is a small price to pay for never having to worry about—for the average American—how they’re going to put food on the table. That might be too philosophical, but as a long-term farm girl who loves that I come from that heritage, it’s an important message for me.
Do you have any advice for reporters covering this topic?
[Posted November 25, 2024 | Download video]
