Cargill CEO Ditches 'Team Transitory', Warns Of Persistent Food Inflation  

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by Tyler Durden
Wednesday, Nov 17, 2021 - 11:40 PM

Cargill CEO David MacLennan has changed his mind about "transitory" inflation and now believes it will be more persistent with higher food prices in 2022. He blamed elevated food prices on snarled supply chains, labor shortages, and adverse weather conditions, among other things. 

MacLennan highlighted that labor shortages are a significant challenge for the food industry. He said food processing plants across the country operate at less than full capacity, which drives down food output and prices higher as demand remains robust. 

"I thought inflation in ags and food was transitory. I feel less so now because of continued shortages in labor markets," MacLennan said during an interview at the Bloomberg New Economy Forum in Singapore. "That's one of the inputs to the supply chain that we're watching most carefully." 

In September, MacLennan was on record saying soaring food costs would be temporary and should recede. Though in the last few months, world food prices hit a new decade high in October, supply chain woes worsened, labor shortages at food processing plants to transportation to ports expanded, adverse weather conditions hit harvests, and transportation and energy costs skyrocketed. It seems the food executive has ditched "team transitory" for a more logical understanding of today's inflationary environment, one that is persistent. 

"When you have limited supply, that can lead to higher prices," he said.

MacLennan is late to the party in abandoning the "transitory" narrative. 

Already, we've reported food inflation and shortages have hit supermarkets, not just in emerging markets but also in the developed world. In the US, Mondelez CEO Dirk Van de Put recently told CNBC that Oreo cookies, Ritz crackers, and Sour Patch Kids would be more expensive next year. There's been chatter that Nabisco, PepsiCo, and Coca-Cola will be raising prices, and Kraft Heinz has told consumers that they must get used to "higher prices." 

Consumers are spending more on food than a year ago. Some have blamed President Biden for the inflation eating away their real wages as polling numbers for the president sink. 

So what's Biden's plan to tackle soaring food costs as his administration runs from one crisis to another? Are price controls next?