The soaring food prices over the past few years will take a toll on families nationwide this week as they prepare their Thanksgiving spreads.
Food prices have been driven up in part because of supply-side factors, such as the higher cost of the fuels needed to transport grain and livestock, as well as the broader inflationary environment. Inflation has soared in recent years, and the overall consumer price index is up more than 18% from the start of 2020.
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Thanksgiving is the perfect example of just how much food prices have increased alongside headline inflation.
The average price of a Thanksgiving meal for 10 people this year is $61.17, according to a report from the American Farm Bureau Federation, which compiles the cost estimate every year around the holiday using a basket of goods that includes only basic foodstuffs and excludes any special ingredients or drinks.
That is a 4.5% decrease from last year when a full holiday spread cost consumers $64.05. But the cost of a Thanksgiving dinner is now 25% higher than in November 2019, the last holiday before the pandemic took hold.
“While shoppers will see a slight improvement in the cost of a Thanksgiving dinner, high inflation continues to hammer families across the country, including the nation’s farmers,” said AFBF President Zippy Duvall. “Growing the food families rely on is a constant challenge for farmers because of high fuel, seed, fertilizer, and transportation costs, just to name a few.
The shopping list for the farm bureau’s informal survey includes turkey, stuffing, sweet potatoes, dinner rolls and butter, peas, cranberries, a tray of veggies, and pumpkin pie with whipped cream.
The biggest driver in the 4.5% decrease in the average price of a Thanksgiving dinner this year compared to 2022 was falling turkey prices. Turkey is the costliest item in the holiday spread, with a 16-pound bird clocking in at $27.35.
David Ortega is a food economist at Michigan State University. He emphasized in an interview with the Washington Examiner that the declining price of turkey is pushing down the overall price of a Thanksgiving meal this year, not the other food items.
“Turkey prices are down significantly from last year. When you look at wholesale prices … they are down around 30% to 40% less per pound from last year,” he said. “Those are wholesale prices, but that means that’s going to translate into savings at the grocery store.”
“It takes time for those decreases in costs on the production side to make their way down to the grocery store,” Ortega added.
Turkey prices, which dropped 5.6% over the past year, fell so much because of the avian influenza outbreak the year before, Betty Resnick, one of the economists who worked on the AFBF project, told the Washington Examiner.
There was a severe outbreak of highly pathogenic avian influenza, also known as bird flu, in spring 2022, Resnick explained. The outbreak resulted in the deaths of millions of birds, creating supply constraints and driving up the cost of poultry. Egg prices also temporarily surged to historic levels late last year due to the outbreak.
“The main driver for turkeys specifically is lack of avian influenza this year. Last year there were record levels of avian influenza. It really decimated flocks across the country throughout the year,” Resnick said. “And compared to last year, we had very, very little avian influenza, so we’ve had in the supply of turkey.”
While there have been declines in the price of wholesale turkeys, that massive drop-off hasn’t fully translated to the turkeys that people buy in stores. Resnick said she thinks part of that dynamic is that the turkeys that people buy for Thanksgiving are frozen and could have been slaughtered months and months ago, meaning that it takes time for those lower prices to be reflected in prices at the grocery store.
One major component of the inflation that consumers have felt over the past couple of years has been rising energy prices. While one might think that wouldn’t translate to higher food costs, when the cost of transporting food items goes up because of higher gas prices and the cost of running a food-making operation or slaughterhouse rises, producers have to increase prices in order to make the same margins as they did before.
Resnick said in the case of farms, owners need to expend money on fuel in order to run their tractors. In slaughterhouses, energy keeps the massive facilities well lit and at the proper temperature.
She also noted that higher natural gas prices also translate to rising food prices because many fertilizers used on farms are made with natural gas.
“So farmers kind of get hit twice when it comes to big changes in energy costs, both from the pure energy perspective but also from fertilizer,” Resnick said.
The rate of inflation generally has eased in the past year, from nearly 9% in the CPI in June 2022 to 3.2% in October. But it has not gone negative, meaning that the overall price level is still high and rising.
“Just because the rate of inflation comes down, it doesn’t mean prices necessarily are coming down. They are just not increasing as quickly,” Ortega said.
But the biggest driver of overall inflation has arguably come from the demand side. During the pandemic, the Federal Reserve slashed interest rates to near zero, making borrowing and investment cheap. Congress also authorized a series of stimulus payments that, coupled with consumers staying home due to COVID-19, led to an explosion of spending as people emerged from the pandemic with their wallets flush with cash.
The Fed is now doing the opposite and working to raise interest rates to tamp down demand.
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But on the supply side, the war in Ukraine also had implications for food inflation, according to Ortega. The war shuttered factories in Ukraine and slashed farm production in what has been dubbed the “breadbasket of Europe.”
Of particular note, cooking oils rose quickly after the invasion. In addition to producing millions of tons of wheat, barley, and corn each year, Ukraine also accounted for nearly half of the global supply of sunflower oil.
