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 2018, U.S. consumers, businesses, and government entities spent $1.71 trillion on food and beverages in grocery stores and other retailers and on away-from-home meals and snacks.

Grocery store food prices up 1.0 percent in second quarter 2019 compared to a year earlier

The food-at-home CPI rose 1.0 percent from the second quarter of 2018 to the second quarter of 2019. The food-at-home CPI is weighted by average consumer expenditure shares, which are largest for other foods (snacks, soups, frozen entrees, etc.), cereals and bakery products, fresh fruits and vegetables, nonalcoholic beverages, and dairy. With the exception of fresh fruits (which decreased in price), these largest-share categories posted modest price increases. Prices for fresh vegetables increased the most at 5.2 percent. Egg prices decreased by 14.9 percent over this period, although eggs represent a small share of total grocery spending.

Retail food price inflation lower than economy-wide inflation

From 2014 to 2018, the all-food CPI rose 4.5 percent—a smaller increase than the all-items CPI, which was 6.1 percent higher over the same time period. Food price increases were also below the 10.8-percent rise in housing costs and 11.4-percent increase in medical care costs. Increased U.S. production of agricultural commodities and a strong U.S. dollar has tempered retail food price inflation during this time period.

Even large commodity price increases result in modest food price inflation

Corn, wheat, and soybeans are the top three U.S. field crops, and they 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.

Food prices less volatile than fuel 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.