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.
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.