I am old enough to remember stagflation, 18% mortgage rates and Paul Volcker’s tough love treatment for the economic ills of the ‘70s. It was no merry-go-round, and I still get twitchy when I see prices rise even a little bit.

On the other hand, given what the economy, the meat industry and consumers around the globe have been through — and are still going through — inflation was expected. It’s the economic immune system response to exactly the kind of structural dislocation we have in 2021: Excess capacity in both labor and resources. It’s a fair antidote, in the sense that higher prices enable companies to spend more on supplies and wages, spurring demand across the supply chain — theoretically, at least; in practice the process is full of fits and starts and a fair amount of fiscal discomfort.

These same inflationary pressures also present opportunities to make right some anomalies in the food industry that have festered for years.

Americans have long enjoyed an infinite variety of foodstuffs, immediately available (now at your doorstep), at prices so low they’re almost criminal. That Americans spend so little of their take-home pay on food is a foundational reason for our economic success over time.

In 2020, U.S. consumers spent an average of 8.6% of their disposable personal income on food, according to USDA’s Economic Research Service. The share of disposable personal income spent on total food has trended downward since 1960; this, despite American’s growing appetite for dining out, which underscores the rock-bottom average cost of groceries.

As a percentage of household income, U.S. consumers spend the smallest portion of their income on food of any country on the planet, according to the World Economic Forum. Where the U.S. drops 6.4% of household income on eating, in Guatemala, the Philippines and Kenya the percentage is more than 40%. In Nigeria, it’s 56.4%.

We have built in this country a vast, fast-moving food industry that produces some of the safest stuff on the planet — but not every step in that journey is as beneficial as it could be.

The meat supply chain, for instance, deposits an abundance of nutritious, safe options in front of shoppers for prices that amount to pennies per pound. Animal rights and environmental activists point an accusatory finger at the U.S. system of concentrated feeding operations for keeping prices “artificially low” for consumers, but nearly every link in the supply chain does its part.

Inflation-adjusted pay for meat plant employees are a fraction of what it was 50 years ago, for example. That, in turn, has enabled companies to low-ball their capital investments; compared with the funds European companies have spent on better equipment, technology and automation, many U.S. plants are still operating like it’s 1999. Meanwhile, the Walmart-ization of the U.S. retail sector presses margins on the demand side.

Inflation, and consumers’ response to it, could be a shove for the industry in a direction that brings production technology into the modern era and finally addresses labor issues that have plagued processors for a generation. Higher prices on end products could make room in the system for, say, livestock vaccinations that hold the promise of tremendous reductions in pathogens coming into the plant, if only someone would agree to pay for them. Shoppers paying more for their proteins may gravitate toward those items they consider “better” and worth the investment, such as claims-based and value-added offerings — which have the added benefit of thicker margins for processors.

I paint a rosy picture here, I know that. It seems the sharpest economic minds aren’t sure how high inflation will climb or how long it will be a factor in our daily lives, although I’ve read that three years is a likely horizon. Like the aftershocks of a major earthquake, the reverberations of the pandemic could be more destructive than the event itself, in a business sense.

All the more reason, I think, to see how many ways inflation could be made to work in the industry’s, the companies’, the employees’ and even the animals’ favor.

Inflate-gate

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