As inflation continues to cool, many Americans are hoping for some financial relief at the grocery store. Unfortunately, it’s not just economic factors that are keeping food prices high.
“Many factors impact food prices throughout the supply chain,” said Craig Fine, a managing partner at Mazars with over 20 years of experience in the manufacturing and distribution industry, with concentrations in food and beverage. “Agriculture costs, processing, transportation, raw materials, labor, machinery, energy and climate factors all impact, to name a few.”
“The food supply chain is very complex,” he continued. “A lot goes into getting us something to eat. All along the way, there are opportunities for problems to arise. There is a lot to consider when you open a bag of chips or enjoy a fresh lobster at your favorite restaurant.”
Here’s a closer look at the factors that are keeping grocery prices high, plus, predictions on when they will stabilize.
World Events Are Affecting Food Prices
Current events occurring both domestically and abroad are causing grocery prices to stay high, Fine said.
“Inflation is still impacting food prices partly based on world events impacting supply — the war in Ukraine and its impact on worldwide grain, avian flu and its effects on chicken and eggs, and climate issues, which are negatively affecting some crops and helping others,” he said.
“Grain and corn continue to be an issue due to the war in Ukraine,” Fine continued. “I don’t believe the overall population in the U.S. can’t find a loaf of bread, but we are seeing/have seen price increases. Drought worldwide is impacting some edible oil supplies — [including supplies of] palm oils and other vegetable-based oils. Again, we have supply and alternatives in the U.S., but prices were impacted.”
Transportation Issues Are Also Affecting Costs
Increasing transportation costs also keep grocery prices high.
“Transportation continues to impact food prices from farm to retailer, which is impacted by labor, supply, energy and fuel prices,” Fine said. “A lot goes into getting a food product from the farm to the fork, and many of those processes continue to be more expensive.”
Supply is also an issue, and the recent Yellow freight bankruptcy will only make things worse.
“The situation with Yellow freight will ripple through many industries, as it impacts supply and the U.S. consumer continues to have high demand,” Fine said. “Additionally, the auto industry is still catching up with the demand for new trucks. Fuel seems to have leveled off but remains an issue as global issues make the industry volatile. All these issues create higher shipping costs that spill down to the consumer.”
Labor Shortages Can Affect Prices at Individual Retailers
If a local grocer has to pay inflated wages due to a labor shortage, those increases are typically passed down to the consumer via higher prices.
“Labor continues to impact high food prices at a local level with restaurants and grocery stores that struggle to find workers and are dealing with salary and minimum wage increases,” Fine said.
When Will Grocery Prices Stabilize?
Although grocery prices are high, Fine believes we may have reached a “new normal.”
“We are seeing some stability,” he said. “Eggs and dairy have stabilized. We noticed some significant issues with citrus in 2022, but that has also stabilized. Meats and poultry are generally more stable.”
He added, “That isn’t to say these items are all inexpensive. They are just more stable, as increases have slowed or leveled. [However], with the current climate issues and issues with international relations, we are always an event away from seeing an impact on certain food products.”
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