Combating the Food Inflation Crisis in the USA with Open Commerce

Over the last few years, since mid-2021, food prices in the US have surged at the fastest pace in decades, leading to a food inflation crisis that’s been at the forefront of household concerns and economic discussions alike. According to the U.S. Bureau of Labour Statistics, over the year ending in August 2022, the price of food paid by urban Americans increased by 11.4%, the highest on record since April 1979.

A simple grocery run now has families paying 10% more for food items than they did a year ago. This striking increase is not just affecting family budgets but is also stunting economic recovery and raising serious sustainability questions.

In this article, we take a closer look at this pressing issue, peeling back the layers to understand the causes and implications. We’ll also introduce you to a potential path toward resolution – Open Commerce – a new way of buying and selling essential food items that can possibly offset the impact of this crisis.

The Food Inflation Crisis in the US: A Snapshot

The US inflation rate has been a roller-coaster in recent years. But amid these fluctuations, one sector seems to be consistently on the rise – food prices. The food inflation rate has outstripped the overall rate of inflation for nearly for year, which is one of the widest gaps since the 1970s. This spike in food process is significant and cannot be overlooked, and it’s effect is akin to a slow leak in a car tire, where the compounding effect over time could significantly affect household finances. Already, the average cost of food consumed at home has climbed 11.3%, according to data from the Labour Department, which is a troubling prospect for any family budget.

Consumer research shows that food price inflation has a greater impact on lower-income families, who generally spend a much larger percentage of their disposable income on food. According to data from the USDA, households with the lowest 20% of income spend up to 27% of their income on food, compared to only 7% among the top 20% of income-earning US households. Unfortunately, higher food prices may cause lower-income consumers to suspend critical expenses like routine health care visits, prescriptions or insurance in order to feed their families. This isn’t just a concern for households alone. The broader economy feels the impact as these higher costs potentially stunt economic recovery..

But why are food prices rising at such an alarming rate?

The Root of the Problem: Broken Supply Chains and Middlemen

The reasons behind the steep food inflation are multi-layered, extending beyond the purview of simple supply-demand dynamics. Yes, unexpected global events, such as the Russian invasion of Ukraine, had nudged up the prices of wholesale food commodities prices, but those have long since fallen back. The more insidious issue is how our current food supply chain is structured.

Disruptions in food supply and distribution have led to increased costs in various parts of the food supply chain. One significant challenge is the issue of the many intermediaries involved in getting food from the farm to the fork. This multi-step, multi-actor process inadvertently inflates the cost of food, as each intermediary along the way takes a cut. Add to this the impact of disrupted supply chains due to global events, and we have a system that is primed for high prices.

Despite their best intentions, the current traditional systems inadvertently contribute to the problem. Helen Dickinson, CEO of the British Retail Consortium, warns that while inflation is expected to ease later this year, “prices are likely to remain elevated as the higher costs throughout supply chains become baked in.” It’s clear that our current approach to food supply isn’t sustainable, economically, or socially.

Combating the Crisis with Open Commerce: The Way Forward

Solving this crisis and reducing food prices can feel almost impossible, but we believe there’s a solution – Open Commerce. Open Commerce is a new way of trading that emphasizes openness, transparency and fair trading across the entire supply chain.

 Open Commerce can revolutionise the current supply chain system by cutting down on the number of intermediaries and promoting transparency, we can greatly reduce the costs embedded in the supply chain, which will invariably trickle down to the consumer.

Reducing the food inflation rate will also require building a more resilient global and local supply chain. Recent global events have tested the robustness of our supply chain, with an average of 34.3% of food and drink manufacturers reporting major disruptions. However, Open Commerce makes it possible to build a system that does not depend on single entities that can profit unfairly from the current distribution system but depends on a network of independent but coordinated participants.

In conclusion, it is time to pivot from traditional systems that inadvertently contribute to rising food prices and embrace innovative solutions that promise a way forward. RedCloud has built the world’s first Open Commerce platform that allows all consumer goods value chain stakeholders to trade openly and without any restrictions. This platform is already helping hundreds of thousands of retailers and businesses access essential consumer goods at prices that they can afford by eliminating unnecessary middlemen and can potentially help reduce food prices in the UK.

To find out more about Open Commerce and how it can help build resilient food supply chains and lower food prices, visit our website, to schedule a personal demo.

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