As the old saying goes, the cure for high prices is high prices. But that line won’t work for food prices at the grocery store, which in August marked the highest 12-month surge since 1979.
Groceries are up 13.5% on the year, driven by spikes in the price of eggs (39.8%), chicken (16.6%), cereal (16.4%) and nearly every other food category tracked by the Bureau of Labor Statistics.
“If the price of lounge chairs goes up too much, people stopped buying lounge chairs. You can live without lounge chairs. You can’t live without food. So the inelasticity of demand, as we call it, when it comes to food, makes it tougher to do,” agriculturist Damian Mason said.
Falling energy prices having little impact on food prices
Families across America have more money in their pockets now that gas prices have precipitously dropped from June’s $5-per-gallon highs. As of Tuesday, the national average for a gallon of gas is $3.67, according to AAA.
But the trucking and agricultural industries are not getting the same break. Diesel is $4.94 per gallon as of Tuesday, compared with $3.31 just one year ago, AAA data shows.
Mason said the cost of diesel and labor throughout the supply chain are two main factors keeping food prices high.
Meanwhile, food companies are raking in profits
Tyson Foods claimed this year that the company is asking customers only to pay for the inflation they’re seeing in the supply chain. But the company saw its first quarter profits nearly double, second quarter net income was up 74% from a year prior, and in the third quarter, Tyson Foods announced it was raising chicken prices again because of strong demand as consumers switch off more expensive beef protein.
“There’s no question that profit is part of the mix,” Mason said of food prices. “There’s no question that the companies that can get away with it are pushing through profits. Grocery stores are also in that category.”
Mason said Kroger, Walmart and Tyson are among the companies who have taken advantage of an opportunity to bump margins.
“They seem to have gotten through with using the COVID excuse, using supply chain as an excuse,” he added. “We’re 2.5 years removed from the first shutdowns from the economy. Is it really that? Or is it that these companies realize they can — I won’t say gouge because that sounds like we’re being anti-capitalistic — but there’s no question that these companies are taking advantage of a situation and passing on some…costs bigger than what they actually are facing to pad their margins.”
Watch the video above to hear how Americans are changing what’s on their plates to avoid high food prices and how long Damian Mason says food inflation could last.
