What is Really Happening With Costs in the Fresh Produce
The harsh reality of soaring prices could cause radical shifts in the industry.
by MASON BRADY
W hile inflation is nothing new at this point in late 2022, October’s Consumer Price In- dex increase of 7.7% year-on-year does not reveal the accurate picture of increased costs within the fresh produce supply chain. Two major cost categories that have risen dramatically by more than that rate are packaging and fuel. In addition, the cost of la- bor continues to be a severe problem for the fresh produce industry and will also be addressed. Packaging is significant in the fresh produce industry. Quality packaging serves as a distinct opportunity for brand placement. On the other hand, packaging is one of the underlying costs within the fresh produce industry that has risen dramatically during the past two years. Packaging cost fluctuations can be broken down into the following two major segments: Paper and plastic. Paper is one of the most common materials used to ship large quantities of fresh produce from shippers to wholesalers and retailers. It is one of the main ingredi- ents used in corrugated cardboard boxes that are filled with bulk fresh produce items or can be filled with bags or clamshells of fresh produce goods. Corrugated card-
board pricing has increased significantly since pre-pan- demic pricing due in part to the continuous demand for cardboard boxes used to ship online shopping purchases. Furthermore, the ability of domestic papermakers to react rapidly to big demand increases is limited, given the recent history of closing mills. For these reasons, paper pricing has increased by 39% from 2020-2022. According to the U.S. Bureau of Labor Statistics, this increase consists of a 25% increase between 2020-2021, and Pinnacle Packaging President Nicole De- Joris said in May that there had been a 14% increase at the beginning of 2022. Another major packaging segment is plastic. Plastic is used within the bags and clamshells that hold various quantities of specific weights and counts of fresh produce. The Producer Price Index for Plastics Materials and Resins Manufacturing shows the index pricing rising by 36% from January 2020 to September 2022. Plastic pricing has been driven substantially by the increase in fuel costs, given that plastic is a petro- leum-based product. And plastic prices have been driven up because of increased online shopping as well, given the
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