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Is your 4th of July BBQ more expensive this year? Here's why.
Heading into the July Fourth holiday weekend, Wells Fargo Agri-Food Institute chief agricultural economist Michael Swanson joins Market Domination Overtime with Julie Hyman to discuss how grocery store prices have changed and why.
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Wells Fargo releasing its Fourth of July food report and it might be a little pricier for Americans to host a barbecue this weekend with the average cost for 10 people rising to $130 this year. Joining us as one of the authors of that report, Michael Swanson, he's chief agricultural economist at the Wells Fargo Agro Food Institute. Thank you so much for being here. Obviously, this is very much on people's minds, especially after the past few years that we have had of rising prices. So, what stands out to you as being, um, sort of the bulk of the increases that we have seen?
Well, it's a question of the haves and the have-nots. So the haves where inflation are beef and eggs. I think everybody's aware of those have been in the headlines. But the numbers are there, 7.4% for hamburger year-over-year up, you know, eggs, you know, depending on where you want to choose the point, 40%. Now they're less expensive protein. So those are the haves. But we're seeing some good values out there. Poultry for example, boneless, skinless chicken breast at 1% up from a year ago. So you just have to choose what you want to put up on that grill.
Um, what you want to put on the grill or I guess on the table sides, right, Michael? Because some of those sides either have not seen huge increases or in some cases are actually heading lower here. I was looking at like fruit salad, for example, you want to go out and buy some watermelon, I guess, because we have, we've seen prices pretty tame there.
You know, absolutely. What we're seeing is kind of a result of California having some good years. The water supply in California has been good, you know, and it doesn't take that many more acres in California to produce good fruits and vegetable crops. And so we're actually seeing the CPI numbers around fruits and vegetables declining year over year, and we're seeing great quality. We're seeing great produce come out of that market.
Um, if people are baking or making deviled eggs, for example, we, we know how sort of eggs have become this hot button issue, and there has been some relief from the highs on the egg front, but if you look at year over year, egg prices are, are still up quite a bit, right?
They are, you know, and that reflects the fact that we do have a lower supply, you know, we're about down 4% on a per capita basis. And so you're going to see that when you have an item like eggs, which are very indispensable and relatively not that expensive, they can see some amazing price spikes in the short term. Especially a little bit of hoarding going on earlier this year.
Uh, Michael, you know, we've seen all the headlines about tariffs and their potential effect on some food items. Um, but you, who have followed the industry, how much of, of the price increases we have seen are about tariffs? How much of them are about sort of normal agricultural cycles? For example, I mean, eggs, right, had to do with bird flu. That didn't have to do with tariffs. But how do we think about the different categories?
You know, we are really blessed with a super abundance of food in the United States. Very few of our foods are imported. You know, we can pick them out, you know, avocados, coffee, things like that, bananas. Those are the ones we know about. But the majority of food is US based, you know, especially during the in-season. What really drives food inflation right now is labor costs. And that's one of the things the Federal Reserve is watching as well. So we see the labor costs at the supermarket and at the restaurant, we're seeing it at the factory, and we're seeing it in the farm fields. So almost every aspect of food inflation right now, domestically, is about that labor cost, which never gets cheaper, but is offset by productivity and yields.
And what is happening in the fields in particular in that equation, given, um, the changes that we have seen to immigration policy over the last several months? Have we seen shortages of labor in, in some of those cases and labor costs go even higher?
Not really, you know, there's a renewed focus on the three avenues. One is going to be make sure you do e-verify. Second is H2A visa labor, and then third is automation and technology. I spend a lot of time out in California with my colleagues, and they're trying to make it easier and more, you know, accessible to work in those fields through shade, water, all those things. So those three avenues are really what's the focus right now across the country.
And, and to get back to the prices of different items that people are, are buying for this weekend, or really for barbecues throughout the summer, right? It's not exclusively a July 4th kind of activity. Do you see sort of changes in consumer behavior based on price at this point, or have consumers become accustomed over the past couple of years to prices sort of rising consistently?
They're accustomed and they have the jobs and income to afford it. Now when you look at the retail price of all three of the major meats versus the hourly wages right now, chicken's at all-time affordability for high, so as pork. And beef is actually more affordable than the 2015 spike that we saw about a decade ago. It's really surprising to people in the industry as well, that the consumer's purchasing power is so strong relative to those retail prices.
Michael, what's your favorite barbecue item?
It's going to be marinated ribs because my wife makes it.
Ooh, I like that. That's a, that was not an expected answer. I like it. Michael, thank you so much and happy Fourth.
Excellent. Have a great day.
Thanks.
