High food prices continue to put a pinch on wallets

WASHINGTON (TND) — The cost of food at the grocery store showed some moderate signs of easing last month after totals for a variety of products from meat to eggs to butter have exploded since the economy started experiencing record-high inflation over the last two years.

Data released Wednesday by the Bureau of Labor Statistics showed some relief came in March, with three of the six major food group indexes falling from the month before.

The meat, poultry, fish and eggs index dropped by 1.4% thanks to an 11% decline in the cost of eggs. Despite the big drop from February to March, eggs are still 36% more expensive than they were a year ago.

Produce also declined by 1.3% in March and dairy products also had a 0.1% dip. Costs for the other indexes all went up, and grocery prices are still 8.4% higher than they were a year ago.

High totals in the checkout lines have forced people to make difficult choices while shopping or to switch to store-branded items as the cost of food has exceeded inflation, which came in at 5% last month.

“We can shift around, but we're still gonna buy groceries,” said David Anderson, professor and AgriLife Extension economist at Texas A&M. “Consumers certainly shift from more expensive items that they buy when they have more money to cheaper items, but we're still going to the grocery store.”

Food prices are excluded from “core” inflation that the Federal Reserve and other economists examine when trying to forecast what’s to come and what policy the central bank should move forward with that would best suit the economy. However, along with gas prices, it is the most visible sign of higher costs for the average American who has to go to the store every week and has seen their bills go up for two years.

The Government Accountability Office examined the sticker shock people have been experiencing over the last two years and what is driving the jump. The report found food processing and retail trade, or costs at the grocery store, were the biggest factors.

“Prices are expected to grow more slowly in 2023 than they did in 2022. But it's still going to grow more than the historic annual average of 2%,” GAO director Steve Morris said. “When you look at the forecast for this year's prices, they're predicted to increase anywhere from 5 to 10%, and probably settle around 8%. So, they're still going to be really high.”

Other factors, including weather that brought on droughts and floods, higher gas and oil costs, increased wages for workers and the war in Ukraine, which has had a big impact on the world’s fertilizer and grain supply. Added up, it creates an 8.4% increase for food at the grocery store since last March.

Many of the inflationary pressures driving food prices up are here to stay for at least the near future, even though inflation has moderated during 2023. Demand for food will also never dissipate like it does in other parts of the economy, which will prevent food prices from returning to pre-pandemic levels.

“One reason we didn't see retail prices come down is that all of us as consumers continued to buy,” Anderson said. “If you're a grocery store, if I can sell this product without cutting the price or putting it on special because people are going to come buy it anyway, there's no market incentive to cut the price.”

The war in Ukraine is also lingering, which can have a global impact on the cost of food through fertilizer, grain and oil prices. In addition to driving up food prices, the lack of grain flowing from Ukraine as a result of the war has also sparked a food crisis in developing nations that rely on those exports.

Russia and Ukraine have reached a wartime deal allowing the exporting of its crops, but it hasn’t been without setbacks. The United Nations’ World Food Program estimates 345 million people are facing food insecurity as a result of the crisis.

“To what extent are farmers in Ukraine able to even plant a crop?” Anderson said. “If there's landmines in your fields or the Russians stole your tractor, you aren’t going to get many acres planted.”