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 2021, U.S. consumers, businesses, and government entities spent $2.12 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 2021 than in 2020. For context, the 20-year historical level of retail food price inflation is 2.0 percent per year—meaning the 2021 increase was 75 percent above average. Meat and fish prices rose most sharply; beef and veal prices increased 9.3 percent, pork prices increased 8.6 percent, fish and seafood prices increased 5.4 percent, and poultry prices increased 5.1 percent in 2021. Fresh fruit prices also increased by 5.5 percent in 2021. Dairy products and fresh vegetables were the only included categories with price increases lower than their historical average.
From 2017 to 2021, the all-food CPI rose 11.1 percent, which is higher than the all-items CPI. Food price increases were below the 11.7-percent rise in housing costs and the 14.4-percent increase in transportation costs. Retail pricing strategies, efficient food supply chains, slow wage growth, and relatively low oil prices tempered food price inflation from 2017–2019. However, 2020 and 2021 were years of high food price inflation due to shifts in consumption patterns and supply chain disruptions resulting from the coronavirus pandemic and associated mitigation efforts.
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. In 2021, the production-weighted price of these crops increased by 50 percent while food prices increased by 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. Although 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.