Michael Swanson, Wells Fargo Chief Agricultural Economist joined Yahoo Finance Live to discuss the food shortages in the U.S.
BRIAN SOZZI: Higher food prices are likely to take their toll on emerging market economies. Let's talk more about this with Michael Swanson, Wells Fargo chief agricultural economist. Michael, good to see you here. What countries are you most concerned about, and where are you seeing the biggest price spikes?
MICHAEL SWANSON: You know, you'll be seeing things like in Latin America, Mexico is one of our key markets that we work with a lot. Certainly, the African countries with lower incomes, where they already have a much higher percentage of their disposable income dedicated to food, and it's much more basic food. So they are really in kind of a tough spot there. Proteins are up because grain and soybean is up. Edible oils are way up, thanks to some of the US policies, along with the shortening.
KARINA MITCHELL: And thank you, sir, so much for being here. I want to ask you, how much has the end of the federal government's assistance program exacerbated the issues that we're seeing now?
MICHAEL SWANSON: You know, it makes a big impact, especially on people like women and children programs, food stamp programs, anything that's seen some of that additional resources taken back out. And we're seeing 5%, 6% food inflation in the United States, which is almost 3x what we used to in the last, say, decade. So it's having a bigger impact on fixed income and also people that are used to using some governmental supplement income on that.
BRIAN SOZZI: Do you see any relief in sight?
MICHAEL SWANSON: Well, it's interesting. We had a much better harvest this year in the United States, which is always a good development, better corn, soybean production. What we're seeing that's a little bit different is the translation of those raw commodities into food. Very few people eat basic foods, you know, like beans and rice. They usually want to buy, you know, bread and other baked products.
And we're seeing a kind of, I think, a permanent move up in labor costs. So not only are some of the ingredients more expensive, but that translation of those ingredients into food, which most people buy, that's really what we're seeing. You know, you saw in your last couple of segments, talking about that lack of labor availability, and it's very true in the food segment as well.
KARINA MITCHELL: And then so how does that translate into changing food habits when you go to the grocery store? I know when I go to the store right now, it used to be that I would fill up the cart, and I would know exactly how much it costs. Fine, but now I can only go 2/3 of the way, and I've spent the same amount of money. So even I'm cutting back on some of the things that I would normally just stock up on.
MICHAEL SWANSON: Well, you know, I have to smile because we talked about the joy of cooking during the COVID situation. And most people really don't enjoy cooking food. They really enjoy the benefit of convenience. But what we're seeing with higher labor costs at restaurants and in the food manufacturing world, it makes your labor in the kitchen more valuable.
So you can take more basic commodities, whether it's potatoes or onions or flour or wheat, and do some additional work at the house to get what you want for the food. So it's kind of a substitution effect where you get more value from your own work by doing it in the kitchen. Not if you want to because Americans always love the convenience, but there's an opportunity. The less processed food that you buy, the greater the savings because you're avoiding that labor pinch that we're seeing in the market.
BRIAN SOZZI: Well, thank you for the inflation hack there, Michael. I'm going to be eating a bag of lettuce today. But are there any commodities that are declining in price or that might be deflationary that consumers could go out there and navigate towards?
MICHAEL SWANSON: Well, we're seeing some pretty good pricing around, you know, potatoes and some of the basic root stocks because we had a good harvest in some of these markets. So now you kind of hate to make that a big part of your diet overall, but just be a careful shopper, I mean, because it gets back to idea that we're not having a poor harvest as much as we're having that supply chain issue and the labor piece.
One thing we're seeing for certain is buying local is going to be advantageous. We say we've seen truck rates from the West Coast to the northeast go from the $3,000 range to $10,000 plus. So any food that you buy local that's not being burdened by that additional freight cost, that will be an advantageous buy for you on a go forward basis.
KARINA MITCHELL: And then what are we seeing-- we see consumer inflation rise 5% last month. And the price of meat is up double digits-- beef, pork, poultry, all of this is way up there. What are we seeing as far as livestock prices?
MICHAEL SWANSON: Well, there's a couple of things going on. One is unfortunately, the cattle feeders and cow producers have not benefited from higher beef prices. It just hasn't worked its way back through the chain. We're hoping that changes in 2022, so they get a better signal to expand. The hog producers and the poultry producers, they're willing to expand, but they're dealing with 580 corn on a nearby contract, which is much higher than it has been in the last several years, along with higher soybean costs. So we're seeing a couple of different segments respond differently.
Now, going back to what might be a little bit cheaper, milk actually has come down a little bit from last year because we're seeing fewer people drinking fluid milk, so a little bit less pressure there. So the proteins are kind of a mixed bag at this point, especially with the turkeys. Christmas is going to be expensive. Luckily, we only do it once a year so do it right.
BRIAN SOZZI: I'm actually writing my shopping list right down, Michael. I have milk and Idaho potatoes on my diet for today. Michael Swanson, Wells Fargo chief agricultural economist, appreciate the insights.