Retail food prices rose in 2020, report finds
The pandemic snarled supply chains and pushed up food-at-home prices by an average of 3.5% in 2020, according to the U.S. Department of Agriculture's Economic Research Service. Higher prices are anticipated this year, too, though the increase is expected to be smaller.
Yes, you've paid more for food at the grocery store during the COVID-19 pandemic, according to a report from the Economic Research Service, an arm of the U.S. Department of Agriculture.
"Food-at-home price inflation was above average in 2020, primarily as a result of the pandemic . Grocery store food prices increased by 3.5%, on average, from 2019 to 2020. For context, the 20-year historical level of retail food price inflation is 2% per year — meaning the 2020 increase was 75% above average," according to the report.
The report said annual retail food prices haven't risen that much since 2011, a time of high crop prices remembered fondly by many area farmers.
In 2020, prices rose for every major food-at-home category except fresh fruits, according to the report, authored by Carolyn Chelius and Matthew MacLachlan of ERS.
Why was fruit different? The reports says consumers in several countries that import large amounts of U.S. fruit were forced to stay at home because of the pandemic, which ultimately cut into U.S. fruit exports to those countries. That, in turn, pushed up U.S. fruit supplies and reduced prices at grocery stores.
The past year was challenging for grocers, said John Dyste, president of the North Dakota Grocers Association.
Basic supply-and-demand drove up retail food prices, as did a big reduction in manufacturers' promotional marketing, which meant fewer items on sale at the retail level, he said.
By and large, shoppers understood that grocers were operating in difficult times. In fact, rather than complaining about higher prices, "People were happy that they were able to get stuff (in grocery stores), especially initially," he said. "So I think they were going to pay whatever it took ... I think consumers understood this was a whole set of different circumstances."
Some rural grocery stores , which still had food in stock, drew shoppers from larger cities where supermarkets were out of food, he said.
Meat prices led the way
Meat prices rose the most in 2020. According to the report, beef and veal prices increased 9.6%, pork prices rose 6.3%, poultry prices were up 5.6%, and “other meat” prices increased 4.4%. Historical inflation rates for these categories are 4.4%, 2.2%, 2.1%, and 2.2%, respectively, the report found.
As the report noted, "The spike in meat prices was a result of reduced supply because of COVID-19-related processing plant closures. Meat prices had not experienced this level of inflation since 2014, when drought and high feed prices combined to drive up retail prices."
Further, "Stay-at-home mandates in 2020 increased demand for several food products in retail stores, rather than at restaurants and schools. Supply chains struggled to adapt to this transition, which put upward pressure on retail prices," the report said.
When grocery stores were particularly hard-pressed by shortages, consumers "would walk into a big supermarket and there wasn't a single package of hamburger in the store. That's a shock," Dyste said.
The report found that the widescale transition from eating away from home to eating at home particularly affected dairy, eggs and nonalcoholic beverages during the year, with their average price rising 4.4%, 4.3% and 3.6%, respectively.
Most of the increase in food prices came in the spring of 2020, with the prices of some products holding steady or even dropping a bit later in the year, the report found.
What about 2021 food prices?
ERS says, "The uncertain nature of the coronavirus pandemic introduces challenges to forecasting food prices for 2021. (Even so), analysts with USDA’s Economic Research Service currently predict retail food prices will increase 1 to 2% in 2021."
More grocers' perspective
Dyste wants to make sure consumers understand that food prices didn't actually rise 75% in 2020. To make the point again, ERS found that grocery store food prices rose 3.5% in 2020, which was 75% more than the 20-year average of 2% annually.
In any case, supply chain disruptions have lessened and conditions have improved, Dyste said.
"As grocers, when this first started, no one really knew what to expect and how long this would last," he said. "Now, things are getting back to normal. Sales are back to normal, and there are a lot of price-conscious consumers" who are focusing on what their food costs, not only on whether it's available.