We are becoming used to seeing the different ways used to camouflage the price increases that inflation makes necessary. Thus the revival in shrinkflation, a maneuver that, over the years, has taken many forms, from reducing portion sizes, to, in an infamous case from the 1970s, hollowing out gumballs. You can find more details of such devices in this Capital Letter from January.
Also back in January, I noticed this story from CNN:
Domino’s Pizza customers ordering chicken wings will soon get fewer of them for the same price.
The pizza chain said it’s cutting the number of wings in its $7.99 carry out offer from 10 pieces to just eight because of rising food and labor costs. Wings will also become an online exclusive, meaning customers can no longer order them via phone.
Domino’s CEO Richard Allison said the company expects to deal with “unprecedented increases” in food prices, explaining that the costs of its ingredients are increasing 8% to 10% compared to last year. That is substantially higher than the usual hike of 3% to 4% the chain normally forecasts.
Moving the deal online has “several benefits” for the company, he added, because the more customers order food online the higher the average receipt. There’s also a cost-cutting benefit because fewer workers are needed to answer the phones.
Many months later, here’s some good news.
NBC (my emphasis added):
The first regular-season game of the NFL season kicks off Sept. 8, and just in time: Chicken wings are at their lowest prices in years.
The Department of Agriculture’s price index for chicken wings is now at levels not seen since 2018, with the average wholesale price of a pound of wings falling to about $1.68 in July, and trending even lower for August.
It’s a startling reversal of a trend that saw a dramatic run-up in prices for chicken wings early in the pandemic, one that coincided with broader inflation in the economy, labor shortages and surging demand for poultry as fast-food chains began rolling out competing chicken sandwiches.
But last month, Wingstop president and CEO Michael Skipworth said the company would start to see deflation in prices for bone-in chicken wings. On July 28, the company said prices had fallen nearly 19% year-over-year in its fiscal second quarter
One reason for the rapid price decline, according to Fabio Sandri, CEO of the multinational poultry processing company Pilgrim’s Pride, is simply supply and demand. On the company’s most recent earnings call, Sandri explained that, earlier in the pandemic, demand for wings from home-bound eaters exploded. So to manage costs, restaurants began to replace bone-in wings with boneless wings.
That allowed supplies — and prices — for bone-in wings to return to more reasonable levels.
“We saw a very fast decline in the price of wings to the prices that we have today,” Sandri said.
But on his company’s fiscal second-quarter earnings call last month, he cautioned that the price declines are unlikely to last for long: As fall and winter sports ramp up, so, too, will demand — and with them, prices.
“We expect also the wings to start rising now coming the football and the basketball season,” Sandri said
Eager wings eaters should not expect the price they pay to fall to pre-pandemic levels. The cost of many other elements involved in getting this delicacy to their plates, most notably labor, won’t revert to what it was, although cooking-oil prices, which spiked alarmingly, have been coming down, too.
Paranoid greedflationists of the Elizabeth Warren school of conspiracist economics will be watching carefully. Will Big Chicken Wing take this opportunity to keep prices higher than they should otherwise be?
The chicken wing may come ahead of the egg (thus resolving the answer to the ancient question), but there is good news on the egg front, too (unless Big Egg starts playing games).
Egg prices that rocketed to record highs after one the worst bird flu outbreaks in US history are now falling — fast — as the industry replaces dead hens.
Midwest large eggs, the benchmark for commodity price, closed at $2.16 a dozen on Friday, down about 37% from late July’s record high, according to commodity researcher Urner Barry. That’ll provide relief for consumers, who saw egg prices jump 47% at US grocery stores last month during the worst period of food inflation since 1979.
Retail rates generally follow commodity prices, so consumers should see a “significant” drop by more than a dollar per dozen in the next 30 days, said John Brunnquell, chief executive officer of Egg Innovations, one of the biggest US producers of free-range eggs…
This cannot come too soon. The increase in food prices was a notably dark spot in the most recent CPI report.
Inflation is wreaking havoc on breakfast, with egg prices at grocery stores soaring a whopping 47% in July over last year, according to retail analytics firm Information Resources Inc.
Although the Consumer Price Index came in lower than expected at 8.5% in July, inflation is continuing to hit grocery shopping. The food-at-home category soared to 13.1 % over the last year, the largest increase since the period ending March 1979, according to the US Labor Department on Wednesday.
Egg prices in particular have been driven higher by one of the worst bird flu outbreaks in US history, killing more than 30 million commercial and wild birds. The crisis hurt egg-laying hens and turkeys the most. Although the outbreak has eased in the US, growers are still repopulating their flocks, which is expected to bring prices down eventually.
Dominic Pino has more on food-price inflation here.
Meanwhile there’s (sort of) shrinkflation news from the economic hellscape that is low-birthrate Japan (year-on-year inflation in July accelerated to 2.4 percent, causing alarm).
Japan’s Pizza Hut is turning to rice to make its pizzas after wheat prices soared following Russia’s invasion of Ukraine earlier this year.
The fast-food chain will start offering a selection of mini-pizzas using rice as a base rather than wheat flour from Aug. 22, with toppings including Ibérico pork and teriyaki chicken. The new range will initially be available for about six weeks, but could become a regular menu item if demand is strong.
And note the nod to the importance of security of supply contained in the two paragraphs that follow:
Wheat skyrocketed after Russia’s war in Ukraine cut off supplies from one of the world’s major breadbaskets, driving some food producers to mix or switch to cheaper alternatives in their bread, pastries and pasta, although prices have fallen lately. The rice used by Pizza Hut Japan will be sourced domestically.
The price of rice has been more subdued due to ample production and existing stockpiles. In Japan, the crop provides the added benefit of not having to rely on overseas supply, a key factor for a country that only produces 38% of its food on a caloric basis and 66% on a value basis.
Expect much more focus on supply in the future, and not just in Japan, and not just when it comes to food.