Food Prices and Spending
Retail food prices partially reflect farm-level commodity prices, but packaging, processing, transportation, and other marketing costs, along with competitive factors, have a greater role in determining prices on supermarket shelves and restaurant menus. Monthly price swings in grocery stores for individual food categories, as measured by the Consumer Price Index (CPI), tend to smooth out into modest yearly increases for food in general. In 2019, U.S. consumers, businesses, and government entities spent $1.77 trillion on food and beverages in grocery stores and other retailers and on away-from-home meals and snacks.
Average annual food-at-home prices were 3.5 percent higher in 2020 than in 2019. For context, the 20-year historical level of retail food price inflation is 2.0 percent per year—meaning the 2020 increase was 75 percent above average. Food price increases in 2020 were primarily a result of shifts in consumption patterns and supply chain disruptions related to the coronavirus pandemic. Meat prices rose most sharply: beef and veal prices increased 9.6 percent, pork prices increased 6.3 percent, and poultry prices increased 5.6 percent in 2020. Only fresh fruits decreased in price, by 0.8 percent, in 2020.
From 2016 to 2020, the all-food CPI rose 7.8 percent—the same as the all-items CPI. Food price increases were below the 11.9-percent rise in medical care costs and the 11.4-percent increase in housing costs. Retail pricing strategies, efficient food supply chains, slow wage growth, and relatively low oil prices tempered food price inflation from 2016–2019; however, 2020 was a year of high food price inflation due to shifts in consumption patterns and supply chain disruptions resulting from the coronavirus pandemic.
For a typical dollar spent in 2019 by U.S. consumers on domestically produced food, including both grocery store and eating-out purchases, 38.5 cents went to services provided by food service establishments, such as restaurants and other eating places. Of the remaining food dollar, 14.7 cents went to food processors, and 12.1 cents to food retailers. At 2.3 cents, packaging costs per food dollar were the lowest ever reported by the current series, which provides statistics back to 1993. These data are prior to the COVID-19 pandemic.
Corn, wheat, and soybeans are the top three U.S. field crops and comprise the majority of field crop inputs to the U.S. food supply. The average farm price of these crops, weighted by total production, regularly rises or falls by more than 10 percent from year to year. However, these price swings have relatively small impacts on food prices. For example, in 2011, the production-weighted price of these crops increased by 43 percent, but food prices rose 4 percent. Price fluctuations of intermediate foods and feeds generally fall between swings in field crop and food prices.
Food prices typically move in the same direction as fuel prices, often with a slight lag as it takes time before fuel costs are incorporated into food prices. While the direction is often the same, the sizes of the price swings differ. Over the past 2 decades, motor fuel and household energy prices have experienced double-digit annual price swings, while food prices have posted annual increases of between 0 and 6 percent, for an average annual increase of 2.4 percent.
In 2020, food spending by U.S. consumers, businesses, and government entities totaled $1.69 trillion, down from 1.79 trillion in 2019, partly due to the COVID-19 Recession that disrupted typical food consumption. Food-at-home spending (food purchased from supermarkets, convenience stores, warehouse club stores, supercenters, and other retailers) increased from $808.0 million in 2019 to $876.8 million in 2020, while food-away-from-home spending (food purchased from restaurants, fast-food places, schools, and other away-from-home eating places) decreased from $978.2 million in 2019 to $813.4 million in 2020. This resulted in food-at-home spending accounting for 51.9 percent of total food expenditures, the first year it has accounted for more than half of food spending since 2008, during the Great Recession.
In 2020, U.S. consumers spent an average of 8.6 percent of their disposable personal income on food—divided between food at home (5.0 percent) and food away from home (3.6 percent). The share of disposable personal income spent on total food has trended downward since 1960, which has been driven by a shrinking share of income spent on food at home. However, the COVID-19 pandemic resulted in the sharpest annual decline in the share of disposable income spent on total food since USDA began tracking these expenditures. In 2020, the share of disposable income spent on total food decreased by 10.1 percent (from 9.6 percent in 2019). In part, this decline was the result of the largest annual increase in disposable personal income since 2000 and the sharpest decrease in food-away-from-home spending.
As their incomes rise, households spend more money on food, but it represents a smaller overall budget share. In 2019, households in the lowest income quintile spent an average of $4,400 on food (representing 36.0 percent of income), while households in the highest income quintile spent an average of $13,987 on food (representing 8.0 percent of income).
High-income countries such as the United States and the United Kingdom have higher food spending in absolute terms, but the share of household consumption expenditures devoted to at-home food is low—less than 10 percent. In Kenya and other low-income countries, at-home food’s share of consumption expenditures can exceed 50 percent. Per capita calorie availability follows the reverse pattern. According to the most recent available data, U.S. per capita calorie availability was among the highest at 3,682 calories per day, while Kenya’s was estimated at only 2,206 calories.