Despite overall inflation slowing down, high prices at the grocery store remain a pain point for consumers.

Food prices have risen 11.4% from August 2021 to August 2022, according to the most recent Consumer Price Index report from the Bureau of Labor Statistics.

Nearly every food item is now more expensive. Bread, for example, was 16.2% more expensive in August than a year ago; the price of eggs has increased 39.8%.

 

How Much Common Food Items Have Increased In Price (Aug. 2021 to Aug. 2022)

 

 

 

Food ItemYear-over-year Price Change
Breakfast cereal16.4%
Meats, poultry and fish8.8%
Eggs39.8%
Milk17%
Fruits and vegetables9.4%
Coffee17.6%
Butter24.6%
Potatoes15.2%

Source: Bureau of Labor Statistics Consumer Price Index

High prices are forcing some consumers to make difficult decisions, such as turning to food banks for the first time in their lives. Some say they’re not getting their full dietary needs, such as an adequate protein intake, because it’s simply too expensive.

Unfortunately, what’s driving the soaring prices isn’t a simple problem or solution—and analysts say it will take time for consumers to see relief.

Global and Domestic Issues Are Causing Food Prices to Rise

There are several reasons why food prices are still rising, including:

1. Pandemic Disruptions

The pandemic disrupted nearly every part of the food supply chain, including production, processing and retail.  Those effects on the food supply chain are still being felt today.

When lockdowns forced people to eat at home, producers catering to restaurants lost a key customer base, while grocery stores faced a massive increase in demand. Many food producers struggled in those early months to convert their operations to serve grocery consumers.

Food production costs also increased due to labor turnover, investments to protect products from contamination, and additional worker-training costs. Even the cost of transportation of food to processors and grocery stores increased as retailers placed rush orders to keep shelves stocked.

These cost increases are folded into the price consumers pay for groceries. And while some transportation costs have dropped, including gasoline, other increased costs throughout the food supply chain offset any potential relief.

2. The War in Ukraine

In the early days of the war in Ukraine, analysts speculated that food prices were bound to be affected. Those predictions have come to fruition.

Russia and Ukraine are some of the largest producers of wheat in the world, together accounting for 30% of all wheat exports.

But the war has posed obvious challenges for Ukraine to continue exporting wheat. Both its agricultural production and export capabilities have been decimated by the war: Its cargo exports decreased 92% between May 2021 and May 2022 according to S&P Global Market Intelligence.

Ukraine and Russia signed a deal on July 22 to release about 20 million tons of grain that were stuck in Black Sea ports. According to McKinsey & Company, the release brought some relief to the market, but long-term complications remain. McKinsey estimates the 2022-2023 grain harvest in Ukraine will end up being more than 30 million tons below normal levels.

With Ukraine unable to fulfill its role as a major wheat producer, the world is facing a shortage. Short supply means the price of wheat is much higher, making it more expensive to process key ingredients, such as flour and starch. In turn, food producers must increase the price they charge consumers to make up for their higher production costs.

3. Sanctions on Russia

Due to the war in Ukraine, Western countries have implemented bans on Russian imports, including oil and gas. Energy prices rose 23.8% from August 2021 to August 2022, per the latest CPI report. Higher energy prices  further exacerbate the already-high food production and transportation costs that the pandemic triggered.

Soaring fertilizer costs also contribute to food price increases. Since early 2021, farmers have struggled to cope with rising fertilizer costs; prices in some areas increased by more than 300% before the war in Ukraine, according to the American Farm Bureau Federation. Higher prices on the production side has forced farmers to increase their crop prices .

Russian sanctions are only worsening the already-existing fertilizer shortage. Russia is a major exporter of fertilizers, accounting for close to 30% of the world’s fertilizer exports.

When Will Food Prices Go Down?

It’s unclear when food prices will drop. After a brief cool-down in July, wheat commodities recently spiked again. A summer of harsh droughts resulted in poor yields from American farmers. Supply constraints and continued high demand could push prices even higher.

Paul Hughes, chief agricultural economist and director of research at S&P Global Commodity Insights, notes the Federal Reserve’s interest rate hikes will eventually play a role in cooling demand and alleviating prices—but it doesn’t mean consumers can expect to see lower prices at the grocery store next week.

“There is a lag effect between commodity prices and the impact the consumer sees,” says Hughes. “It will take a while for that to all funnel through to the consumer.”

Until then, consumers may be reluctant to believe there are ways to truly maximize their grocery purchases while prices remain sky-high. But there are still ways to cut down on your grocery bills.

How to Save on Groceries While Prices Remain High

Shopping at low-cost grocery stores can be one option to help stretch your dollar.

Aldi, for example, is known as a cheaper grocery chain because it doesn’t come with the frills of regular supermarket chains: Items are shelved directly in their shipment boxes and you bag your own groceries. By keeping labor costs low, Aldi can charge lower prices.

If you haven’t considered couponing, now may also be the time to start. Many large grocery chains have their own apps that allow you to virtually “clip” coupons into your account and redeem them at checkout.

2 Responses

    1. Hello and thank you for checking out the blog, I’m glad you thought some of the content was interesting, please stay tuned for more content about different ways to prepare and implement different strategies and products to fight against food shortages and issues that impact our food sustainability and economy.

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