Consumers and producers alike have felt the strain as inflation has driven the cost of food higher, and they’re bracing for more of the same in the year ahead.
According to the most recent data from the USDA, food-at-home costs have gone up 12.4 percent year-over-year since October 2021, the first time in 40 years groceries costs have seen a double-digit increase.
“I haven’t seen production prices like this increase across the board,” said Phil Visser, owner of Zeeland-based Visser Farms LLC. “We’ve had isolated incidents that have impacted costs, and the ’80s were tough. But this — this is really tough.”
A combination of factors, including rising costs of oil and fertilizer and a depleted labor market, are pushing prices up on the farm and at the grocery store, with producers and vendors preparing for a similar environment next year.
USDA economists project food-at-home prices in 2023 to increase between 2.5-3.5 percent, while food-away-from-home prices are predicted to rise from 4-5 percent.
The forecast for continued inflation comes on the heels of a projected increase of 11-12 percent for food-at-home prices and 7-8 percent for food-away-from-home prices for all of 2022, according to the USDA’s most recent projections.
That said, the agency reported that increases in overall food prices and food-at-home prices slowed in October to their lowest level of 2022.
Visser Farms is a nearly century-old family production with 270 acres of farmland and 100 crops between its Jenison and Zeeland locations. The producer sells directly to consumers via community-shared agriculture and area farmer markets, as well as supplies roughly 20 West Michigan restaurants.
Visser, who manages the farm with his wife, notes that labor and fertilizer costs have had the largest effect on operations.
“I tell my wife to go buy stuff. I can’t walk in and see those prices,” Visser said.
Prices increases for raw materials that make up fertilizer have hit farmers hard, with nitrogen and potassium doubling and phosphorus averaging a 60-percent increase. According to the Fertilizer Transparency Report by the Farm Business Network, prices are expected to remain high in 2023 amid skyrocketing energy costs and given that Russia remains the world’s largest exporter of fertilizer.
As well, worker shortages are driving up the cost of labor while limiting the scope of production. According to a 2021 Farm Journal Labor Survey, 87 percent of farm employers are finding it harder to fill positions.
However, pending legislation could ease the tight ag labor market in 2023 and provide long-awaited relief for farmers. The Farm Workforce Modernization Act, which passed the House earlier this year and awaits action in the Senate, would reduce costs for farms that use immigrant labor, allowing farmers to hire more labor and increase production. If passed, the bill is projected to save farmers $1 billion in the first year.
Michigan's farmers would welcome this relief to reduce the cost passed on to customers.
“The hardest part is to raise my prices,” Visser said.
Kingma’s Market, a locally owned supermarket on Grand Rapids’ northeast side, has managed to mitigate higher costs through relationships with local producers, despite double-digit increases in food prices, according to owner Alan Hartline.
To that end, roughly 50 percent of the products Kingma’s Market carries are produced in West Michigan.
“That reduces that carbon footprint and the fuel cost and fuel is astronomical right now,” Hartline said. “We have a number of local relationships that have helped us to be a little more resilient.”
The market’s wall featuring more than 250 bulk items remains a customer draw, but Hartline says keeping it stocked while watching costs has been a challenge.
“We’ve been buying in higher volumes and buying less frequently,” Hartline said. “Wheat and flour and all of those inputs are still super high. I don’t know when the ceiling is going to be. We’ve been hard-pressed to hold down the retail (price) on that before we ultimately have to pass it on.”
In spite of higher costs, Kingma's Market hasn't experienced a significant swing in customer volume, which aligns with national trends. In fact, the higher food costs have more people eating at home: Bloomberg reported that 85 percent of America’s meals are prepared at home versus by a restaurant.
“We see that people aren’t eating out as much or doing happy hour, but they still want good quality food,” Hartline said. “That has been in our favor a bit. People got used to eating at home during the pandemic, which has boded well for supermarkets.”
According to a recent report by global financial firm BTIG, poultry prices should drop “substantially” in the first quarter of 2023, while beef prices are expected to rise 15 percent.
“We have seen some costs with meat begin to come off,” Hartline said. “We keep talking to our suppliers. ‘You’ve doubled the cost. When do we start to see some moderation?’ We’ve got our fingers crossed that we will see some key categories moderate.”
Food bank funding not keeping up
As well, area food banks have felt the pinch and are looking ahead at prices as well as increasing community needs.
Other Way Ministries, a food bank on Grand Rapids’ West Side, went from serving 150 families a month before the pandemic to 750 at the end of September, according to a report from media partner WOOD-TV8.
Citing growing needs across its footprint, Feeding America West Michigan received a $2 million American Rescue Plan Act funding allocation from Kent County to expand operations in Kentwood amid skyrocketing demand from first-time visitors and people with day-to-day needs, as MiBiz reported last month.
“During the first COVID event in 2020, overnight we saw a 200- to 300-percent increase in need and an 80-percent decrease in donations,” President and CEO Ken Estelle said in the previous report. “Now we are dealing with the effects of long-term inflation. So it’s not the spike we saw during COVID, but we continue to see more and more people coming in for the first time, which is a phenomenon we hadn’t really expected.”
Similarly, Meals on Wheels Western Michigan has experienced decreasing demand for services since the height of the pandemic, said CEO Lisa Wideman. The organization serves 6,000 needy seniors annually in West Michigan by providing meals and food across dining centers, food pantries and meal delivery.
However, the nonprofit has noted a rise in chronic need as food prices increase.
“The challenge is that food prices have gone up substantially. It is a huge problem for us,” Wideman said.
The Meals on Wheels production kitchen makes 3,000 meals every day, with products primarily purchased from Gordon Food Services.
“We have really increased our fundraising efforts, and we are committed to never having a waiting list. There are some things we don’t do so we can keep feeding people,” Wideman said. “While community support has gone up, so far, it isn’t enough to meet inflation.”
News coverage in the food/agribusiness section of MiBiz is made possible by advertising support from Dan Vos Construction Company. Dan Vos Construction strives to serve people and to enhance life, while maintaining long-term relationships with customers, sub-contractors and employees. This advertisement has no effect on editorial consideration in MiBiz.