The high cost of groceries was a talking point in the presidential election and the uniformed, who failed to do their own research, blamed the Biden administration. Yes, food prices rose over 28% in five years, however digging deeper into the facts explains why. A review of a compilation of different reports as follows:
Fact #1: High operating costs.
Beef is a good example, but can be applied to all commodities. Years of drought, high grain prices and rising interest rates made cattle farming so expensive that many U.S. farmers reduced the size of their herds to cut costs — and some got out of the business altogether. Now, the U.S. cattle inventory is the smallest it’s been since 1951. That huge drop in supply has pushed prices for beef to all-time highs. The high operating costs are passed onto the consumer.
Fact #2: Supply chain
Covid: Unavoidable events globally contribute to supply chain disruptions. The Covid pandemic had a dramatic impact. There was a surge in demand for groceries and supply slowed with production cuts. Prices for popular items surged.
Ukraine war: Ukraine historically accounted for 9% of the global wheat market and 12% of the corn market, according to the USDA’s Foreign Agricultural Service. As their production of grain and other foods ceased the losses had to be made up by other suppliers.
Bird flu: A highly contagious and fatal bird flu resurfaced in 2022 and has been devastating for egg production and meat chickens. The flu is now transitioning into other livestock.
Fact #3: Corporate profits
Grocery stores’ profit margins increased in recent years, according to a March 2024 report by the Federal Trade Commission. The FTC report notes that food and beverage retailers saw their revenues outpace their costs by more than 6% in 2021. That was a new high for that particular profit measure until 2023, when it reached 7%.
Food manufacturers have also relied on price hikes and other tactics to maintain profitability, as well. When that happens, companies know they can’t keep raising prices without further impacting their sales volume. Instead, they make other product changes, like shrinking packages, giving you less product for the same price. That maneuver is known as shrinkflation. Who among us actually notices when a grocery item is the same price or an even higher price but the package size shrunk?
As food costs have skyrocketed for Americans, some of the country’s biggest chains and grocery brands, including General Mills, PepsiCo, and Tyson, have blamed the price hikes on supply chain issues and economy wide inflation. But behind the scenes, these companies have expanded profits and quietly authorized billions of dollars in lucrative stock buyback programs and dividend payouts to shareholders. Between 2020 and 2022, corporate profits rose by 75 percent—five times as fast as inflation; 41% of inflation was due solely to corporate-profit making.
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Taking the time to do the research provides the facts about grocery prices, but passive voters who accept political rhetoric are simply gullible. One thing is for certain - massive tariffs will do nothing to ease grocery prices and would have the opposite effect. Consumers who want to make a difference should start first with price gouging.
