(Bloomberg) -- Soaring food costs driven by supply-chain snarls and other disruptions hurting the agriculture industry will prove “transitory” and should dissipate in time, says the top executive of giant crops trader Cargill Inc.
Prices for foods ranging from breakfast cereals to meat have continued marching upwards from the initial surge during the early days of the Covid-19 outbreak, thanks in part to supply-chain disruptions. Recent incidents include Hurricane Ida in the U.S., which damaged a Cargill port terminal in Louisiana, and a European energy crisis that's crimping the continent's food production. A labor shortage has even left a Cargill turkey facility in Virginia running at 70% capacity.
“There are issues in the supply chain: everything from labor shortages to the impacts of climate change, extreme weather events, demand pull for biofuels,” Chief Executive Officer David MacLennan said Thursday in a Bloomberg TV interview. “So there's a lot of pressure on the supply chain for agriculture and food.”
The CEO's comments echo those of Federal Reserve Chair Jerome Powell, who has labeled price jumps as “transitory” to soothe fears of an upward spiral in inflation. Supply-chain breakdowns -- from port closures to shortages of semiconductors and lumber -- have been one of the main factors in pushing U.S. inflation above 5% in the summer.
Still, MacLennan said he's struck by the resilience of farmers and others to get food to where it's needed, adding that he thinks food inflation “is going to be transitory” and is “optimistic that supply-chain issues will clear up over time.”
In term's of disruptions affecting Cargill's U.S. operations, MacLennan said the company hasn't determined when its storm-damaged terminal in Reserve, Louisiana, which handled about 9% of key U.S. crop exports, will resume operations. He said that American exports will be lower due to the lingering impacts from Hurricane Ida.
Cargill has benefited from the volatility in supply chains, with the closely held U.S. company on pace for a record year of earnings.
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