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.
As measured by Consumer Price Index data, average annual food-at-home prices in 2019 were 0.9 percent higher than in 2018. Most food categories posted modest increases of between 0.3 and 2.0 percent, contributing to generally low inflation at grocery stores in 2019. The price index for fresh vegetables increased the most—a 3.8-percent rise in 2019. Egg prices decreased the most, falling by 10.0 percent between 2018 and 2019, although eggs represent a small share of total grocery spending. Fresh fruits, fats and oils, and poultry had modest price decreases.
From 2015 to 2019, the all-food CPI rose 4.5 percent—a smaller increase than the all-items CPI, which was 7.9 percent higher over the same time period. Food price increases were also below the 11.7-percent rise in housing costs and 11.6-percent increase in medical care costs. Retail pricing strategies, efficient food supply chains, slow wage growth, and relatively low oil prices have tempered food price inflation during this time period.
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 over 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 last two 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 2.3 percent.