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Grocery prices skyrocket 31 percent in one year as lockdowns, drought and money printing unleash food inflation
By Mary Villareal // Aug 22, 2021

Food prices in July were up 31 percent from the same month in 2020, according to the United Nations Food and Agriculture Organization. This rise is fueled by supply chain disruption and extreme weather conditions.


Central banks disregard food and fuel inflation when setting policies as they are the most volatile categories in the typical basket of consumer goods and services. However, these are the first things that come to mind when ordinary people think about inflation.

Shang-Jin Wei, a professor of finance and economics at Columbia Business School, noted that central banks are underestimating the change to take more drastic measures that they themselves are predicting.

Prices for chicken and other proteins have been inflated in the U.S. due to labor shortages at processing plants. Strong demand from at-home cooks is a factor, but restaurant chains are competing in chicken wars. At the same time, the supply has been constrained as farmers scramble to rebuild their flocks – many of which were decimated by winter storms in February.

Middle-class families in the U.S. are not going hungry as food prices rise, but millions of individuals are.

Before the pandemic, about 35 million Americans were already considered food insecure, or lack consistent access to enough food for all the members of a household. Amidst the huge spike of joblessness brought about by the COVID-19 recession, the number jumped to 45 million or more than 13 percent of the population. (Related: Surging food prices force restaurants to increase cost of menu items.)

Analyst: Price increases may continue in next two years

Grocery prices are trending upward the entire year, and steady price increases may be the new normal. Phil Lempert, an analyst and food trends expert, said that people are going to continue seeing price increases in the next two years or so.

In the decade before the pandemic, year-over-year price increases have been around 1 percent for food at home. Meaning, July's 2.6 percent increase is more than double of what people are accustomed to.

In many cases, these price increases are probably overdue.

Agricultural commodity prices have been on the rise in the past year due to the conditions surrounding the growing season and the buying trends. For example, China is buying raw commodities such as soy to be used as animal feed. Pork and chicken prices are also on the rise as raising animals continue to become more expensive.

The raw price of producing crops and animals on the farm is only a fraction of the total cost consumers pay, but energy, transportation and labor costs also factor in. All of those aspects have seen rise in costs. Gasoline prices have risen 41.8 percent since July 2020 and there are not enough truck drivers to transport food.

Labor costs also play a role. Wages have been increasing in both food processing and retail, adding to the end cost for consumers. "It’s probably the case that if we want the kind of labor that we’ve come to expect in the foodservice sector and food processing, then [employers] are probably going to have to pay a little more," Lempert said.

Consumers on a tight budget are now considering spending more time shopping around and looking through weekly ads to compare prices. Drugstores, for instance, have milk typically priced cheaper than supermarkets.

More and more consumers are also switching to less expensive products to keep food budget on track. Grocery delivery services are now being avoided as customers have to pay additional delivery charges, fees and tips. Oftentimes, items are also priced higher in grocery delivery services than on physical shelves in the store.

Learn more about food prices at Food.news.

Sources include:



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