High food prices are here to stay, though USDA expects price increases to be less drastic

Food prices have been rising rather quickly in the last five years since 2019. In fact, in 2022, and according to the U.S. Department of Agriculture (USDA), food prices grew at the fastest rate since 1979, which was an overall increase of 9.9 percent.

As previously reported in The Lakeland Times, food prices have increased due to many different reasons. One of those reasons was the rise in diesel fuel, another being a shortage of truck drivers. The USDA said the food price increases in 2022 were partly due to a Highly Pathogenic Avian Influenza outbreak that affected egg and poultry prices, as well as the war in Ukraine that put pressure on the economy as a whole. 

Food price increases in 2023 decelerated, when prices went up by 5.8 percent. The USDA said the declaration of price increases was generally due to some relief in inflation, supply chain issues and whole food prices being less than what they were the year before. 

The Times interviewed local grocery experts for part one of this two-part series, and because they compete locally in the community, the Times decided not to publicly name those who provided the information. The first report, “Field to fork: Wages, labor, insurance and gas among several expenses raising food prices,” examined the reasons food prices seem to be so high right now. That report begs the question: will consumers ever get relief from the increased costs? The answer, simply put, is no.

Miracle Whip, for example, may have given consumers what’s commonly referred to as “sticker shock” in recent years. A 30 fluid-ounce jar of the mayonnaise alternative costs roughly $10 retail right now. That price was significantly lower from what it is now prior to the pandemic.

When a product goes on sale at a reduced price — Miracle Whip in this case — that’s in order for wholesalers to make up for a decline in sales and lower their inventory again. 

If wholesalers get supply-heavy, they have to move the product. Essentially, the supply and demand of the product got screwed up once the price increase hit a certain threshold and consumers were driven away from buying it.

While it may look like the retailers are making a higher profit on an item when it goes from full-price to a lower sales price, that isn’t the case. 

The cost of products from manufacturers to retailers don’t stay the same. Again, using Miracle Whip as an example, when the sale on that product is over and inventories are normalized, the prices will go back to its original base price, which is now significantly higher from four years ago.

Manufacturers never “take a decline” in prices for their products, according to one of the experts who’s been in the industry for about 50 years, which means most prices consumers see on the shelves are likely here to stay.

The experts the Times spoke with said an average of 50 to 100 products per week increased in cost and price stability is nowhere to be seen. “Aggressive promotion” is becoming more common though, they said, which is likely the result of more consumers not willing to buy products not on sale.

According to the most recent food price outlook by the USDA, the consumer price index (CPI) of food-at-home purchases (grocery store or supermarket purchases) was 0.9 percent higher than one year ago. The CPI, according to the U.S. Department of Labor, measures inflation as experienced by consumers in their day-to-day living expenses. 

Products the CPI, or inflation, increased the most for in one month, from July to August, include the categories of eggs, sugar and sweets, beef and veal, and dairy. Eggs had the highest one-month inflation increase by far with a 4.8 percent change in price. Sugar and sweets had the second highest with a 0.8 percent change and beef and veal, and dairy both had a 0.3 percent change.

By the end of the year, the USDA predicts prices for all food in 2024 will have increased by 2.2 percent, which continues the trend of decelerated price increases seen last year. 

That’s expected to continue in 2025.

“In 2025, food prices are expected to increase more slowly than the historical average rate of growth,” the USDA food price outlook states. “In 2025, prices for all food are predicted to increase 1.6 percent, with a prediction interval of -3.0 to 6.4 percent. Food-at-home prices are predicted to increase 0.8 percent, with a prediction interval of -5.9 to 8.2 percent.”

While grocery stores and supermarkets are still able to have profits, the smaller players typically operate on “razor-thin margins.”

That’s one thing the experts the Times sat down with said and it was also stated in an open letter to both presidential candidates, Vice President Kamala Harris and former President Donald Trump, from IGA (Independent Grocers Alliance), a wholesaler of food products commonly seen on the shelves of stores here in the Northwoods.

IGA’s letter paints a daunting picture for locally owned grocery stores in a market that’s seemingly becoming harder and harder to compete in day after day. 

But, IGA says, it’s always been hard for locally owned food operations to survive, “with long hours, working holidays, managing high volumes on very low margins.”

“When everything goes right, family-owned grocers operate on razor thin margins — 2 (percent) or less,” the letter states. “Lately nothing is going right. You often lose money on commodity items like bread, milk, and eggs, and frequently the costs of energy, transportation, and labor grow so fast, you realize you worked 80-hour weeks only to lose money at the end of the month.”

IGA says inflation has made a difficult job even harder. 

“Everyone is angry about the price of food, and they often take out their frustrations on the stock team, cashiers and department managers who work throughout our stores,” the letter states. “To Vice President Harris and former President Trump, (here’s) one simple request: when looking for a scapegoat on why grocery prices are high, temper your statements with the facts. One third of the U.S. grocery industry is made up of independent retailers, all fighting to ensure they can provide food to their communities. Pre-COVID, post-COVID, our fight is the same, and so is our bottom line: less than two cents on every dollar. Maybe. On a good day.”

Last year, IGA says, independent grocers’ net profits decreased to 1.4 percent. IGA says this mean independent grocers have lost leverage unlike the bigger retailers and credit card companies. 

“Said another way, family-owned small businesses are not gouging shoppers,” the letter states. “If you are looking for villains in a high inflation market, I suggest you look elsewhere. Global companies would be a great start. Or look at the credit card providers: Visa’s net profit last year was over 50 (percent), they might be a good start.”

In conclusion, IGA says local grocery stores didn’t “pump trillions of dollars into the economy” or “start land wars in Europe or the Middle East and we didn’t raise the price of energy, labor, utilities, or anything else we pay for to keep our stores operating.”

“Trying to lower the cost of groceries is a noble goal,” the letter states. “We support you (Harris and Trump); we would work with you. But blaming family-owned grocers for high prices is just plain wrong.”

Trevor Greene may be reached via email at [email protected].