Pandemic affects costs; winter storm in Texas might be a factor
There are many different reasons why Santa Barbara residents and Americans nationwide might be seeing a slightly higher total when they fill up their car with gas or buy groceries these days.
Like most things, the cost increases can be attributed to the pandemic.
Jams in the world’s supply chain could be one reason, according to NBC News, and global shipping dropped in 2020 for the first time since 2009.
John Dixon, the owner of Tri-County Produce on Milpas Street, told the News-Press Thursday he doesn’t have specific numbers, but there has been an increase in prices.
“There has been a number of products on a regular basis rising five cents here, 10 cents there,” he said. “That’s been happening all year. It is true that a lot of things have been going up in price, but not significantly. Things that used to buy for $1.99 are now $2.39.”
Mr. Dixon didn’t mention any specific products increasing in price more than others, but said that the incremental increases seem to be across the board.
“It’s small amounts, but over time, if it keeps going up a nickel here, a dime there — in this business, it’s all about the nickels and dimes,” he said.
The U.S. Bureau of Labor Statistics Consumer Price Index data for January found that the cost of food eaten at home rose 3.8% from a year ago, while energy went down 3.6%. The combined production bottlenecks and demand spikes could be the explanation.
The recent winter storm in Texas could also be a reason the national average price of gas jumped by roughly 18 cents in the past two weeks, according to national media reports.
Food prices also have to do with the climate, and extreme storms and changing weather patterns can impact growing timelines and crop yields. However, Mr. Dixon doesn’t think that’s the case for Tri-County Produce, at least.
“Produce is definitely affected by supply and demand on a regular basis. Any time you affect that supply and demand, it certainly affects prices one way or another, up or down, but I’m not going to attribute it to climate change or things like that. I think we’re having our pretty usual weather patterns,” he said.
At Gelson’s Market, however, costs across all items are up about 2% from last year, according to Gelson’s chief merchandising officer, John Bagan.
“Every major department is seeing costs increase in 2021 versus the beginning of 2020 except for produce,” Mr. Bagan told the News-Press Thursday.
He said costs vary across the major departments. Areas like liquor, dairy, seafood, service deli and frozen increased 4% to 6%. Grocery, pre-pack deli, floral and meat prices rose by roughly 2% to 3%.
Produce prices actually decreased by 4%.
The Certified Angus Beef Prime grade beef category showed an increase 10% to 15%. Farm-raised salmon prices increased by 15% to 20%, and live lobster costs are seeing increases at 30%.
“Quite honestly, costs for fresh fruits and vegetables were mostly favorable all of 2020 and into the start of 2021 due to shortfalls in the food service and hospitality pipeline,” Mr. Bagan said. “There were heavy supplies that remained stable that we were able to capture, all mostly due to restaurant closures.”
Mr. Bagan said costs for the full year of 2020 were down 2.8% from 2019 in produce. The decrease for the floral section was 1.9%.
Mr. Bagan said meat prices rose because of the increase in feed and labor costs, along with poor weather in the Midwest and productivity declines due to the pandemic.
“Since last year when the pandemic arrived, consumers have unfortunately had to deal with conditions that have rarely ever occurred outside of rare events like natural disasters,” he said. “During the panic-buying phase, there were extreme impacts on availability of product and we were at times unable to keep product on the shelves. It is fortunate, though, that prices for healthy items like fresh produce have actually been down throughout this time.”
Many other things can explain cost hikes, he added, such as limited catch regarding seafood and temporary closures of meat production plants at the beginning of the pandemic and opening later at reduced capacities.
“All the foods that are produced in production plants or in fields are affected — anything that takes manual labor — due to illnesses and reduction in production due to need for distancing,” Mr. Bagan said. “We never like to see costs go up. Gelson’s and other grocers work on margins that are much lower than other businesses, so when our costs go up, they impact our customers through higher retail prices.”