US animal protein market expects another rise in prices

Due to the current geopolitical context, all food categories except fresh vegetables are expected to increase in price by another 3-4% in the coming months.

The Federal Reserve Board voted to raise interest rates by 50 basis points in an attempt to curb price inflation. Monetary policy measures do not take into account the main reason for rising food prices - how large food companies use their market leverage to pass costs on to consumers and make windfall profits.

The Food Value Index has risen 10% over the past 12 months, driven primarily by over 13% increases in MEAT, poultry, fish and eggs and a 16% increase in beef prices. Commodity prices are seeing their sharpest rise since the 1970s due to supply disruptions from RUSSIA and Ukraine, sky-high gasoline prices and unregulated speculation in the grain market. Poultry culling due to avian flu causes spikes in poultry and egg prices. All food categories, except for fresh vegetables, are expected to increase in price by another 3-4% in the coming months.

This price increase was caused by food companies passing their costs on to consumers, subsequently making windfall profits. 2021 was the most profitable year for large corporations since 1950, with pre-tax profits up to $2.5 trillion and after-tax profits up 35%. 

Tyson, one of the largest "Big Four" meat and poultry conglomerates, recorded a profit of more than $1 billion in the first quarter of 2022, up 48% from the previous year, as beef prices rose more than 23%. At the center of speculative global commodity trading, Cargill posted $5 billion in profits on $134 billion in revenue in 2021. 

In the supermarket sector, in the 5 weeks ended April 2, food sales rose 6.4% in dollars but fell 4.1% in volume as higher prices pushed by retailers began to weigh on consumer demand. Albertsons, the fifth-largest grocery store chain in the country, reported a flat 7.5% increase in sales in the three months ended Feb. 26, up nearly 20% from two years ago. Quarterly profit rose to $455.1 million from a loss of $144.2 million a year earlier. Similarly, Kroger, which accounts for more than 10% of all food sales nationwide, reported identical sales and higher profits.

Recent research illustrates these inflationary-profitable trends, in particular by debunking the myth of wage-price spirals driven by increases in workers' incomes. More than 53% of the increase in prices over the past two years was due to increased profits, while wage increases were less than 8%. This is a big reversal from the trends of the past 40 years, when profits drove prices up by just 11% and labor's share was over 61%. And Morgan Stanley's analysis came to a similar conclusion, even after news of the pandemic's decline in labor productivity broke, that "real wages have systematically lagged behind productivity growth for much of the past two decades, and as a result, the labor share in income has declined markedly.