If 2020 was the year the health crisis tumbled the economy, 2021 is the year of stressed supply chains, widespread shortages, and rampant inflation. Most of the U.S. industries are still feeling the cascading effect of global supply chain disruptions, rising commodity prices, soaring freight costs, a computer chip shortage, and now an acute labor shortage is threatening to hold back the economic recovery for much longer than expected. From cyberattacks to extreme weather to panic buying, our supply chains have experienced one major challenge after the other. But while inventories have been at all-time lows, pent-up demand and skyrocketing container prices are pushing consumer prices to sky-highs. That’s why you should start stocking up on food supplies right now because experts are alerting that prices are about to explode.
Economists have been warning that grocers will have no hesitation about passing on those increased costs to consumers. In fact, grocery stores are not only passing on the bill of rising commodity and freight prices to shoppers but also testing their limits to see how much they can send prices up before demand starts cooling and they effectively start losing money. Consumer prices for food increased by 2.2% in May, compared to the same time in 2020. The price of pork, seafood, fruits, vegetables, and milk, all jumped between 1.9% and 9%. Higher milk prices and a shortage of other ingredients and supplies are affecting even Starbucks, making it hard for consumers to get their favorite drink. In the company’s app, the first thing you see is a pop-up that reads, “Sorry for the inconvenience, some items are temporarily unavailable”. Just like many other chains, the company is having to remove some products from the menu because prices are just too high to turn a profit.
But that’s just one sign of how deep this crisis is getting. Supply chain problems are affecting almost every industry from Starbucks to cars to pretty much every sector you can think of. And adding transportation issues to product shortages and soaring demand, the result is very painful inflation for American consumers. As food prices continue to surge, beef and pork have been leading the rise. Pork prices jumped 2.6 percent in the month of April and 4.8 percent from a year ago, adjusting for seasonality. While beef and veal prices went up by 3.3 percent from a year ago, according to data released by the Bureau of Economic Analysis on Friday.
After a cyberattack shut down one of the biggest meat processing plants in the U.S., the decline in meat production dropped to the lowest level recorded since 1996, and since meat and pork production have been dwindling since last year, and stockpiles in cold storages have significantly shrunk, meat shortages might get a whole lot worse this summer as demand has already increased 7.7 percent this year. While retailers are running out of a wide range of products, from bicycles to hot tubs and most notably – since they weigh so heavily in retail sales – new and used vehicles, this mess is still showing up on inventories. A recent report released by the Census Bureau exposed that inventories at retailers, from grocery stores to new and used vehicle dealers, plunged to $602 billion in April, marking the lowest inventory-sales ratio in the history of data going back to 1992.
And if you think things might improve throughout the year and inventories might get restocked, according to meteorologists an above-average hurricane season is likely to worsen U.S. supply chain woes this year. Todd Crawford, chief meteorologist at The Weather Company, says that there will be at least 19 named storms, eight hurricanes, and four major hurricanes in the outlook. However, as Convoy’s Terrazas pointed out, hurricanes won’t be the only disasters that will affect supply lines this summer. “We’re obviously watching all kinds of weather. It’s not just hurricane season, but it’s also shaping up to be a pretty active Western drought and wildfire season. Basically, the Western half of the United States is in severe drought at this point already,” he said.
For that reason, the best way to fight against such catastrophic shortages and insane price hikes is to prepare in advance for potential disruptions, especially when natural disasters are looming. “The sooner you get your bottled water and your canned food needs in your garage or in your basement, you’re going to be prepared for whenever it strikes and put less stress on supply chains through last-minute shopping,” Terrazas concluded. So get your emergency supplies ready before a threat arises and, of course, before they become too expensive. We should be prepared for the perfect storm that is coming because once it hits there’s going to be a mad rush all over the country.