Yahoo Finance Good news: Food inflation down. Bad news: It may not last for some items.
Consumers may need to pull back on the Sunday pasta — tomato sauce could cost more in the coming year due to California's wet weather.
Grocery prices were down 0.2% in March compared to February — the first drop since September of 2020 — but the good news may not last for certain food items.
California’s wet weather, which has triggered massive flooding, will impact prices and not in a good way. As a result, common household produce is “going to be expensive” this coming year, said Danny Koolhaas of Wells Fargo. Salinas Valley, which he says produces nearly 80% of “all our table veggies,” has been severely impacted by the flooding with 10% of its acreage still underwater. That delayed planting.
“Think of processing tomato, so for pasta, for pizza sauce, that [price] is going to go up again," he said. Due to that delay, "we can’t plant enough processing tomatoes this year." His advice to consumers: "You just have to find the deal where can find them, but there is going to be some items that are going to go up this year.”
The good news: Per the latest CPI data, tomato prices dropped 3.4% in March compared with February. Overall, the cost of fruits and vegetables are down 1.5% on a monthly basis One item driving that decline is lettuce, which is down 5.6% on a monthly basis.
But the bigger concern is what happens next due to flooding and supply shortages and being sure the Valley is able to meet demand from consumers. "We're going to have some supply issues with leafy greens here in the Salinas Valley," he said.
Other items that could be impacted by California's wet weather are tree nuts like almonds and pistachios.
Koolhaas said tree nuts are something his team is "monitoring very carefully and closely over the summer months."
“The weather that we had in February has significantly decreased the amount of hours that are required for these trees to pollinate with bee activity," he added. "So there is fear of a very small crop coming off a smaller crop than we had last year already…prices will definitely increase as a result of this tighter supply.”
How much? If there is a small crop “we have potential for very expensive almonds," he explained.
A potential risk that could change this outlook for the worse: California's snowpack melts too fast.
"We've got a significant amount of water in the snowpack here and when that does melt, and we're hoping that won't happen very quickly, because if it did, it could be catastrophic flooding back in the Central Valley again, where we get, obviously, a lot of produce," Koolhaas said.
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Brooke DiPalma is a reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.
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