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BACONomics: Biden’s plan to reduce food price inflation

Last week I wrote about how Russia is trying to keep food price inflation down (within Russia) by implementing export tariffs on goods like sunflower oil, metal, and wheat. How much that will help keep prices down and what the long-run impacts will be are left to be seen.

This week, let’s talk about Biden's idea on what to do in the U.S. It’s a different approach to the same problem.

As a review: food prices are increasing. The USDA reports that food prices from August 2020 to August 2021 increased 2.7 percent. Interestingly, "Of all the CPI food-at-home categories tracked by the U.S. Department of Agriculture (USDA) Economic Research Service, pork has had the largest relative price increase (5.4 percent) and fresh vegetables the smallest (0.5 percent). No food categories have decreased in price in 2021 compared to 2020."

A lot of the overall food price increase is due to disruptions in supply caused by COVID related issues and some related to natural disasters. Meanwhile, demand has remained high or is increasing for certain products – both domestically and internationally.

This is exactly what happened in the meat market. I wrote about it last year. For more detail, check out the article. But, in short, during the early months of the pandemic, many workers in meat packing factories started getting COVID. Because of this, those factories had to temporarily shut down. These shutdowns not only caused decreases in meat available in stores (increasing prices in grocery stories), but it also decreased the demand for livestock – if meatpacking factories can’t operate, they won’t buy meat to pack… These issues are not immediately righted and likely have had carry over effects to now.