With prices of key staples such as turkey, butter, vegetables, wheat, and sugar all increasing by double-digit percentages over the previous year, Mintec’s Thanksgiving Dinner Index has risen to its highest October value since the index began in 2019. The Thanksgiving Dinner Index, which measures price fluctuations across key food commodities that make up a traditional Thanksgiving dinner, rose by 15.8% in October 2022 compared to the same point last year.
Potatoes
The price of US potatoes rose significantly in October 2022, up by 97% y-o-y to $0.26/lb. Prices are elevated due to a decline in acreage and yields across the US, combined with higher production costs. These factors are putting significant financial pressure on growers due to reduced profit margins. According to the USDA, the amount of land devoted to potato planting is expected to decline by 3% y-o-y in 2022 to 910,000 acres. Acreage in Idaho, the main potato-producing state, is set to fall to its lowest level since 1965.
The season started off with colder-than-average weather, which delayed crop progress. Excessive heat then followed throughout the summer months, a critical development period for potatoes. Dry conditions caused a lack of deep soil moisture, which is necessary for potatoes to grow. Consequently, growers reported a drop in yields, lower quality, and smaller-sized potatoes. Potato growers are also facing higher production costs, largely from energy, fertilizer, and transportation, adding to the upward price momentum.
Prices have also been supported by firm demand, and this is expected to remain strong as the US approaches the festive season. However, rising inflation combined with growing fears of a recession could impact consumption patterns. Processed and fresh potato product sales may pick up if shoppers begin to view these products as value for money at a time when the cost of living is rising.
Sweet potatoes
In contrast, US sweet potato prices declined slightly by 3.8% y-o-y to $0.50/lb in October 2022, in line with plentiful supply that currently outstrips demand. Favorable weather in North Carolina, the largest sweet potato-producing state in the US, led to higher yields this season, according to market sources. In line with seasonal trends, sweet potato prices typically decline as growers harvest throughout September and October. Therefore, at this time of year, the largest proportion of sweet potatoes are available on the market, keeping prices subdued. As stock levels decline, supply and demand are likely to come into balance later in the season.
Despite the decline in prices, growers continue to grapple with higher input costs, including fuel, transportation, and labor.
Carrots
The price of US carrots rose by 24.3% y-o-y to $0.64/lb in October 2022, attributed to higher input costs combined with tighter supply. The area devoted to carrot production has declined in the US due to increasing labor and farming costs. These costs have turned some farmers into alternative crops. Growers in California, the largest carrot-producing state in the US, face supply shortages amid a prolonged drought and a shortage of water for irrigation. This is reportedly leading to the loss of some fruit and vegetables because growers only had enough water to irrigate priority crops with the highest value and returns.
Additionally, the cost of energy, fertilizer, sprays, and seed have all risen significantly, driving up the cost of production. Furthermore, a farm labor supply shortage remains following the impact of the pandemic, which forced some individuals out of work. Thus growers continue to face increasing pressure to raise wages in order to fill labor shortages, as well as to keep up with elevated wages.
Almonds
The Mintec Benchmark Prices of Californian almonds (standard 5% almonds, FAS US) fell by 29% in the 12 months through to October 2022, to an average of $1.57/lb. The decline was driven by muted consumer demand in the face of ongoing inflation in many markets, combined with the good availability of almonds despite the current drought in California. The tightening of consumer budgets led to a decline in retail sales across the nut and dried fruit category, with Mintec industry sources estimating that volumes of tree nuts have fallen 20-30% against “normal” levels.
Additionally, the strength of the US dollar against many currencies in major buying regions has increased costs for importers outside the US. This has heightened pressure on US prices as buyers push for cheaper prices denominated in US dollars to offset unfavorable exchange rates.
Source: Mintec