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Yes, your groceries are costing more each month. What's behind the price increases?

The rise in grocery prices that began at the start of the COVID-19 pandemic doesn't seem likely to reverse in the near future.

The latest numbers from the Bureau of Labor Statistics, which recently released its monthly consumer price index data, show a 0.4% increase in food items — for food both at home and away from home — for the month of April, for all urban consumers. There was a 2.4% increase over the past 12 months. (The 12-month increase for all items was 4.6%, the largest 12-month increase in more than a decade).

Those increases are seen in all 52 food categories tracked by consumer data analytics company NielsenIQ over the past year, with prices for baked goods (such as doughnuts, muffins and rolls), seafood and diet foods among those with the largest increases. Price increases over the past 13 weeks are less dramatic, with the exception of seafood, but the increases for prepared foods and meats remain high.

Unsurprisingly, the reasons for the higher grocery costs largely all track back to the pandemic and its effects on the food supply chain.

The Food Marketing Institute notes that every single part of the food supply chain has been impacted by the pandemic, which in turn impacted the cost of groceries. During the pandemic, the demand for groceries increased at the same time operating costs for producers and retailers increased.

While the cost increases may be easy for many families to absorb, at least in the short term, for families experiencing food insecurity, the higher prices are a significant burden.

"Families who already face food insecurity must make hard choices when grocery prices rise," Larry Morris, director of partner services for the Food Bank of Central & Eastern North Carolina, told The News & Observer via email.

"For better or for worse, we can control how much we spend on food, unlike many other household expenses, so families may buy less food than they need in order to pay the rent or mortgage, utilities or a car payment.

"If grocery prices continue to rise," Morris said, "we may see an increase in demand at the food pantries that we serve as families try to make ends meet."

Here's more information about rising grocery costs.

What's driving grocery price increases?

Nearly all of the factors contributing to increases in grocery prices can be linked back to the COVID-19 pandemic.

— Supply chain disruptions: The grocery supply chain is made up of three major components: production, processing and retail. Within those sectors, there are costs associated with transportation, energy and more, and those costs are influenced by things such as weather disruptions (to both crops and transportation) and population fluctuations — and of course, a global pandemic and an oil pipeline hack.

— Higher demand: During the past year, people have been cooking, eating and working at home much more, so they are doing more grocery shopping. To ease a bit of the pain early on, suppliers worked to shift high-demand products from shuttered restaurants to grocery stores.

— Raw materials prices have increased: Bloomberg reports that rising commodity costs are also a factor. The Bloomberg Commodity Spot Index, which tracks 23 raw materials, is now at its highest level in almost a decade, according to Bloomberg.

— Transportation costs: Gas prices have risen, and there are lots of reasons for that. The primary one is demand, according to a USA Today fact check on gas prices. Prices plummeted during the early part of the pandemic, when everyone was staying at home. As everything has started to reopen, demand increased and so did prices. Second, gas prices are always higher in the summer, when refineries switch to summer blends. And third, the winter storms in Texas in February and the more recent ransomware attack on the Colonial Pipeline also helped drive up gas prices, which impact the cost of the goods being transported.

— Higher labor costs: Labor shortages have forced many employers to pay higher wages, especially in jobs considered higher risk during the pandemic (such as factory, restaurant and grocery jobs). Many companies in turn increase the costs of their products to maintain profit margins.

— Grocers may offer fewer discounts: When demand for products is high, food manufacturers and grocery stores may offer fewer discounts and coupons. According to the Wall Street Journal, discounts dipped at the start of the pandemic, when shoppers were scrambling to buy essentials and stockpile groceries. But later in 2020, when consumers started spending less, as extra unemployment money ran out, some of the discounts returned.

Which food categories are most impacted?

All of the food categories tracked by NielsenIQ are more expensive than a year ago.

Over the past year, the price of eggs has increased nationwide by 8.2% and fresh meat has increased by 8.6%. Pasta, rice, dry beans and grains increased by 5.7% and processed meats, such as bacon, increased 9.2%.

At restaurants, Bloomberg reports that prices are increasing in "packaging, pork and pancake mix," along with chicken — all of which could lead to supply problems and higher prices at restaurants. Bojangles, a Charlotte-based fast food chain, recently reported supply problems for Chicken Supremes chicken tenders.

Are grocery prices different from region to region?

An analysis of NielsenIQ data by NBC News found that the price increases varied across the country.

For example, bacon costs nearly $1 more than the national average per pound in Boston and Philadelphia, and about 70 cents more per pound in Chicago. In Dallas, items such as eggs, chicken breast, ground beef and sandwich bread increased by more than 5% at one time, according to NBC.

How long should we expect food prices to continue to rise?

The trend is expected to continue over the coming months, according to a recent report on the pandemic's impact on inflation written by White House economic advisers.

But the good news, reports USA Today, is that many economists believe that higher prices across the board are a result of increased demand from reopening the economy (which is a good thing), and that those costs should stabilize by next year.

 

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