What’s Driving High Food Prices?

• Dwindling supply plus rising demand, said Ortega.
• Several factors caused supplies to sink.
  • During the pandemic, people rushed into stores and cleaned out the shelves, throwing suppliers into a tailspin. Then, in 2022, Russia invaded Ukraine, leading to a global shortage of wheat, vegetable oils, and other grains. There were also export restrictions on staples such as palm oil, leading to price increases.
  • On top of this, significant drought in the U.S. affected beef prices, and a multiyear avian flu impacted commercial poultry and eggs.
• All of these shortages caused prices to spike.

Meanwhile, What Caused Demand to Rise?

• Fiscal stimulus payments made during the pandemic added more money to the economy. And, at the same time, households accumulated more savings because they weren’t traveling or going on vacations.
  • Now people are spending, but there’s not as much to buy—so the demand drives up prices.

Price Gouging Also Factors Into High Prices

• Price gouging is when suppliers raise prices by 10 percent to 25 percent or more during periods of crises such as a hurricane, power outage, and other triggers in the market.
  • Nearly 40 states have laws banning price gouging, but there’s no law at the federal level.
  • Owens supports a federal ban on price gouging. “I think it’s one more tool that the federal government would have to prevent against this kind of extractive disaster capitalism,” she said. Ortega worried the law could have unintended consequences.
• Price fixing through corporate consolidation is also an issue, with companies joining up with other companies to set a price.
  • Owens said, “I like to use a true crime metaphor: It requires means, motive, and opportunity to commit the perfect crime. The motive is pretty clear . . . companies are out to make a buck. The means is the power and size that these companies have been amassing for decades. But what changes is you finally have that opportunity, under the cover of inflation, to push harder, faster, higher, and longer for pricing. And that’s what we’ve been seeing in the grocery sector.”

The Overall Takeaway

Presidents actually have little power to affect food prices in the short run. There’s a need to address the root causes of high prices, and there are ways our country can do this:

• Take action to make sure our food system is more resilient to future shocks, including those caused by climate, by taking steps like planting drought-resistant crop varieties.
• Strengthen the social safety net to make sure food is more affordable for everyone; support the Supplemental Nutrition Assistance Program (SNAP).
• Build resilience in the supply chain–such as buffer stocks for grain—that would help prepare for the next disruption or emergency.
• Antitrust policy is a critical tool to tackle consolidation over the long term. “In a world in which we have increased competition, we have more players in the space, and that will have good impacts on pricing,” Owens said.

Reading and More

• “Under Trump, consolidated corporations generally benefited. The Trump administration dissolved the USDA agency tasked with regulating anti-competitive practices in the livestock, poultry, meat, grain, and oilseed industries. . . . The Biden administration made some attempts to rein in consolidation. In 2022, for example, President Joe Biden signed an executive order aimed at creating more competitive practices, especially in meat and poultry supply chains. Harris’s plans to go after “price gouging” fall in line with these initiatives.” — from Can Lawmakers Really Tackle High Food Prices? by Nick Bowlin
• Sign up here for Civil Eats’ weekly newsletter–and join thousands of others who want to keep the pulse on food systems reporting and analysis.
• Civil Eats recently removed our paywall—which means our reporting is free now to everyone, everywhere, for at least the next year. To keep the stories free, we need your support. Become a Civil Eats member to support our work, and to stay in the loop about future virtual salons.