Inflation may be slowing overall, but food prices are still soaring.
Over the past 12 months, grocery prices soared 13.1% — the largest annual increase since the year ending in March 1979, the Bureau of Labor Statistics said Wednesday.
Prices of almost every grocery item have ballooned since last year.
The price of eggs soared 38%, and the prices of other commodities also jumped: flour 22.7%, poultry 17.6%, milk 15.6%, ground beef 9.7% and bacon 9.2%. Fruits and vegetables are 9.3% more expensive.
A number of factors have contributed to the rise in food costs: deadly avian flu has resulted in fewer eggs in the United States, a severe drought in Brazil cut coffee crops, and the war in Ukraine led to a spike in wheat prices in the spring.
When commodity prices fall, it takes time before those lower costs are passed on to consumers. In addition, a lot of other costs for producers – fuel, labor and packaging – are also high.
And demand has increased as supply has stagnated.
Demand for food is increasing
Unlike discretionary goods, consumers cannot stop buying food when prices rise. However, they can opt for less expensive options. Producers, grocers and restaurant operators have noticed that consumers are actually trading less — exchanging high-priced items for more affordable items.
Earlier this week, Tyson said demand for steak was falling while interest in chicken was rising. Wendy’s traffic has suffered because some customers are opting to pack lunches or eat breakfast at home, CEO Todd Penegor said in an earnings call with analysts after Wednesday.
Penegor said about 82% of meals were eaten at home pre-pandemic, but that figure has since jumped three percentage points and remains there.
“Consumers are a little more strapped, so some more meals are prepared at home,” Penegor said. “Inflation is up, so net disposable income is pinched a bit.”
Restaurants are also raising prices, but at a slower clip: In the 12-month period through July, menu prices rose 7.6%, less than overall inflation.
In addition, food prices are largely unaffected by current government efforts to curtail spiraling costs.
Federal Reserve Chair Jerome Powell agreed as much during a Senate Banking Committee hearing in June, saying that raising interest rates to fight inflation won’t lower food prices.
“Food and energy are affected by global commodity prices, saying, ‘Hey, these things aren’t really directly under your control,'” noted Michael Gapen, head of US economics at Bank of America Global. Research.
Basically, the thinking goes like this: Because the US can’t control international factors like the war in Ukraine and high shipping costs, it can’t fully control domestic food prices.
What’s more, the US government doesn’t have as much food stockpiles as it does oil, noted Rob Fox, director of knowledge exchange at CoBank, which provides financial services to agricultural businesses.
“The government has no ability to release wheat and corn and cheese and other surplus stalks,” Fox said.
Which is more expensive in June?
The result is consistently higher prices in the grocery aisle, with some items seeing bigger month-to-month spikes than others.
In July, adjusted for seasonal swings, egg prices rose 4.3% compared to June. Coffee and peanut butter are each 3.5% more expensive. Flour prices increased by 3.2% and bread prices by 2.8%. Cheese jumped 2%, while chicken gained 1.4% in price.
There was some relief though. Citrus fell 3.2% and whole milk fell 1.4%. Undercooked beef roasts fell 1.3%, and undercooked steaks fell 1.1%. Ham is 1% cheaper.
The biggest drop was in hot dog prices, which fell 6.1%.
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