High food costs have become major talking points in the upcoming presidential election, with both sides citing different reasons for rising grocery store prices over the past four years. Economists say a number of factors have been at play, depending on the type of food.
Vice President Kamala Harris, who is running for president, vowed last week to limit food inflation with a federal ban on food price gouging. Her proposal would give the Federal Trade Commission and state attorneys general new authority to investigate and penalize companies that violate the ban.
On the other side, former president Donald Trump has worked to connect inflation and high food prices to the Biden-Harris administration’s economic policy.
Food and agriculture economists say the supply chain disruptions during the COVID-19 pandemic played a role in inflation, especially with processed food products like bread, crackers and cookies that are in the supply chain longer and are susceptible to upstream challenges. But fuel and labor costs as well as the spike in commodity prices that followed Russia's invasion of Ukraine have also played a role.
“It’s hard to find a product that hasn’t experienced a significant increase in price at some point over the past four years,” said David Ortega, a food economics professor at Michigan State University.
It’s well known that the pandemic had a significant impact on agricultural productivity, from the ability to harvest crops to the functionality of beef and pork processing plants, said Ricky Volpe, a professor of agribusiness at CalPoly and former economist with USDA.
During the pandemic, there were also coordination issues with transportation and storage, with global ports eventually becoming overwhelmed by imports and exports. This resulted in longer wait times, all while grocery demand had skyrocketed as consumers paused eating out at restaurants, Volpe told Agri-Pulse.
Since 2020, the price of corn, soybeans and wheat have been elevated, which contributes to inflation through the raw commodity cost, said Scott Irwin, agricultural marketing professor at University of Illinois. This only represents a portion of the total price, however, and only equates to a limited impact on overall food costs.
The main sources for the increases consumers see at the store are associated with the cost of processing, distributing and marketing food products, Irwin said. These have increased due to higher gasoline and diesel prices and labor costs.
Some of these issues, such as truck transportation and labor, already existed, and were simply heightened by the pandemic, Volpe said. These two issues, along with unpredictable weather, are the main reasons Volpe believes food prices are still high despite a reprieve in inflation.
“We can’t pin those problems on COVID,” Volpe said. “We already had them and we still do.”
Upstream costs, like increased energy and trucking rates and labor shortages, eventually filter down to retailers, even if that’s not apparent to consumers. Volpe said retailers are aware their vendors are dealing with these persistent upstream challenges in the supply chain.
“Those go a long way towards sort of demotivating retailers from actually lowering prices when they're dealing with these persistent input costs that are sort of unpredictable and always sort of nipping at their heels,” Volpe said.
Retailers also have to factor in the high costs associated with changing prices, like printing new tags and marketing tools.
The pandemic is not the sole global event at play with food prices. Russia’s 2022 invasion of Ukraine pushed commodity prices up, as some countries placed export bans on certain goods. Additionally, the increased crude oil price exacerbated transportation issues.
While some of those impacts have cooled, it takes time for changes to fully work through the supply chain to the retail level, said MSU's Ortega.
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Climate change and extreme weather over the last several years have also affected the food supply, which in turn alters food prices at the grocery store, Ortega said. For example, extreme drought out west in 2022 impacted leafy green, specialty crop and beef production.
During this period, Ortega said it became more costly for beef producers to keep their animals and livestock, so they sold a portion of their herd at the time. This caused beef prices to decrease slightly in 2022, but those are now rising again because many producers got rid of the breeding stock needed to grow future beef supply.
The egg market also took a hit starting in 2022 and 2023 due to highly pathogenic avian influenza, Ortega said. The impacts of the flu were compounded by higher feed costs, which also affected the price of chicken and turkey.
Consumer reaction and purchasing have also influenced the food price ecosystem. When pandemic-era stay-at-home orders took effect, some restaurants and the food service sector experienced major challenges and may have shut down quickly. Ortega said that the abruptness led to supply chain pressures.
Additionally, consumers started to spend more on food at grocery stores and restaurants starting in 2022 after households accumulated savings during the pandemic due to the shutdowns and government stimulus checks, Ortega said.
“You have these supply shocks, you have increasing consumer spending on the demand side, and so prices have nowhere to go but up,” Ortega said.
As prices went up in 2022 and early 2023, shoppers began changing their buying habits, substituting food items or going to different stores because of price differences, said Steve Markenson, vice president of research at FMI-The Food Industry Association, which represents major food retailers such as Kroger, Albertsons and Walmart.
Some shoppers have also started considering different factors in selecting food items, Markenson said. Rather than just looking at the prices of a store, consumers may consider the shopping experience, ease of access, or the sustainability and quality of a product. Consumers have also gravitated more toward premium, private products.
Barring another major geopolitical event or shock to the food system, food price increases are expected to be on par with pre-pandemic level inflation. USDA predicts food at-home prices will increase by 1% in 2024 and by 0.7% in 2025, according to its latest report.
Fortunately for consumers, wages are beginning to catch up with the price increases Americans have seen over the last several years, Ortega said.
Economists said price gouging is not the primary driver of high food prices, and action taken to address it could have unintended consequences for producers and consumers.
“I appreciate the focus on ensuring that consumers have access to an affordable food supply,” Ortega said. “But focusing on price gouging and using price controls is not an effective policy to achieve that.”
Pushing prices below the market equilibrium can increase demand, but make it more difficult to maintain supply. It can also lead to a decrease in product quality if producers have to cut corners to meet demand, Ortega said.
Irwin said that if price gouging is defined as taking advantage of supply disruptions to charge excessive prices, there is little evidence of that actually happening.
“I grew up with the Nixon era price controls in general, including on food, and it didn't work then, were widely considered to be a disastrous policy by a Republican administration,” Irwin said. “I don't see why you would expect anything different today.”
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