Why a Winter Food Shortage in the U.S. Looks Unlikely in 2022

Mohit Oberoi, CFA - Author
By

Jul. 21 2022, Published 10:01 a.m. ET

At the meeting of G20 finance ministers in Bali, food security and inflation were at the top of the agenda. The U.N. has been warning of a global food crisis while Amadou Hott, Senegal's Minister of the Economy, has warned that more people could die globally due to the food crisis than due to the COVID-19 pandemic. Could there be a food shortage in the U.S. this winter?

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There is already a shortage of some food products in the U.S. The out-of-stock rate for food and beverages was 10 percent in June, according to the Consumer Brands Association. The out-of-stock rate is the highest for sports and energy drinks at 16 percent. Talking of specific products, Jif peanut butter and Sriracha sauce have been particularly hard to find.

The food shortage situation is easing in the U.S.

The out-of-stock rate for CPG (consumer packaged goods) has come off its highs and of now within the historical averages. While there is still a shortage of some products, the situation isn't alarming. The most severe food shortage that the U.S. witnessed was the baby formula shortage. While the Biden administration could have acted much earlier, it eventually stepped in and arranged imports.

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Here's why the possibility of winter food shortage in 2022 looks low.

The possibility of a nationwide food shortage this winter looks low. First, the global food shortage is expected to get better in the back half of the year. Ukraine and Russia are expected to agree to allow exports of Ukrainian grains. Also, fortunately, the U.S. is a net food exporter so it isn't impacted as much by the global food supply chain crisis as some of the other countries.

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Some food products might still experience a shortage this winter.

That said, the memories of empty shelves at grocery stores during the winter in 2021 are still fresh for many people. The supply chain crisis got worse during the holidays and retail companies were left scrambling to meet the strong consumer demand amid the global supply chain crisis.

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In 2022, consumer demand is also expected to be tepid compared to the previous year. Multi-decade high inflation is taking a toll on consumer demand. We could still see some shortages but they shouldn't be too divergent from the historical averages.

For example, turkey could be in short supply again this winter. The U.S. turkey production is expected to fall this year due to the bird flu. There was a turkey shortage in 2021 and we could see something similar in 2022. The U.S. Department of Agriculture has forecast that turkey production in 2022 will fall compared to 2021, which would make it the third consecutive year of lower production.

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Food inflation is a bigger concern than the shortage.

At least in the U.S., food inflation is a bigger concern than shortages. In June, food inflation of 10.4 percent was higher than the headline CPI of 9.1 percent. Meat and egg prices have been especially high due to the bird flu cases.

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Globally, some countries like Sri Lanka, Afghanistan, and parts of Africa are battling a severe food shortage. However, more than a reflection of any global food shortage, these issues are due to soaring food prices, which makes it tough for these countries to pay for imports.

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