How Vegetable and Fruit Inflation Has Impacted the Industry in 2022

A September 2022 report indicates that despite dropping gasoline prices, inflation has remained at a high 8.3%. With interest rates hiked at exponential levels, global markets have plummeted.

So what does this mean for the produce industry? Here’s what you need to know about vegetable and fruit inflation, and how solutions like Silo can help you better manage your expenses during times of economic uncertainty.

What is inflation and how does it impact the produce industry specifically?

Inflation is a sustained increase in the price of goods and services in an economy. Over time, inflation erodes the purchasing power of money, which means that each unit of currency buys fewer goods and services. Inflation also redistributes wealth from savers to debtors, because fixed payments on loans are worth less in real terms as prices increase.

The negative impacts

Inflation impacts the produce industry specifically by increasing the cost of inputs. This puts pressure on margins, and can lead to decreased profits for producers. The resulting consolidation in the produce industry can ultimately cause fewer choices for consumers. As such, it’s important to keep an eye on inflation and conduct fresh fruit sales accordingly.

Additionally, inflation can reduce demand for fresh produce, as consumers switch to cheaper alternatives. Inflation can also make it difficult to pass on price increases to customers, as they may be reluctant to pay more for the same product.

The positive impacts

While inflation can have negative impacts on the produce industry, there are also some positives. For example, inflation can create opportunities for producers to source cheaper inputs, and can increase the value of land for growers. It can also spur innovation and creativity as companies look for ways to cut costs and increase efficiency.

Of course, whether individual businesses are impacted positively or negatively by inflation depends on the length and severity of these economic changes. Although it can be a mixed bag for businesses, the industry as a whole sees supply chain disruptions, increased inventory and overhead costs, and stagnation in investment.

Ultimately, how a company responds will determine whether it thrives or struggles in the long run.

What causes inflation in the produce industry?

There are a number of factors that can contribute to produce inflation. For example, an increase in the cost of inputs, such as labor, can be a contributing factor.

Other causes can include things like droughts or other weather-related events that disrupt supply chains, or government policies that affect trade and transportation. In some cases, producers may also deliberately choose to raise prices in order to maximize profits. Whatever the cause, inflation can have a significant impact on both producers and consumers alike.

Inflation can cause prices for fresh fruits and vegetables to skyrocket, making them unaffordable for many families. This can lead to increased demand for cheaper, processed foods, which are often less healthy.

How has inflation impacted prices for fruits and vegetables?

Fresh produce sales have been affected by inflation through increases in pricing. The ProduceIQ Index objectively measures price changes in the produce market, providing data for 40 different commodities.

A more specific example of how inflation has been impacting the affordability of produce (according to what’s been reported by the ProduceIQ Index) is price increases for commodities like limes.

Prices for limes climbed a significant 8%. Cold and rainy weather, heat, and high humidity have created limited supply. This has been exacerbated by a reduction in the amount of available labor, as well as local issues in production countries like Mexico, including widespread pathogens and cartel-related problems.

Prices have not only increased for growers and shippers, but have also impacted consumer affordability.

How produce businesses can combat inflation

There are a few ways that businesses can combat produce inflation.

Increase efficiency and productivity with technology

One way is to increase efficiency and productivity. This can help offset increases in costs by allowing businesses to produce more with fewer or the same amount of resources. Automation, lean manufacturing techniques, and other process improvements can all help boost efficiency and keep costs down.

You might consider, for example, implementing the use of Enterprise Resource Planning (ERP) to more effectively manage day-to-day operations. ERP solutions can help produce businesses streamline accounting, inventory management, communications, and more.

Adjust and stabilize prices

Some produce businesses deal with inflation by adjusting prices regularly, which can help them keep up with rising costs and continue making a profit. Price stability can be difficult to achieve, considering the many factors that can impact pricing, but if done successfully, it can help businesses stay afloat during periods of inflation.

Negotiate with suppliers

Another way to combat inflation is to negotiate better terms with suppliers. This may be hard in times of high inflation, but it’s worth trying to lock in prices for longer periods of time. This can effectively insulate businesses from short-term price increases and give them some stability in their expenses.

Manage your expenses with Silo

Vegetable and fruit inflation can be hard for both consumers and businesses to deal with. During times of economic uncertainty, you’ll need to manage your business expenses carefully to prevent your profit margins from being significantly affected.

For this, you can utilize ERP solutions like Silo. Our platform allows you to ensure profitability through breakeven views and automated expense linking.

You’ll also benefit from increased visibility. A centralized database means you’ll have one source of truth for all the information needed to run your business—from expenses to payments.

Set your business up for success and book a demo with Silo today!