Why are groceries so expensive?

Grocery prices in the U.S. went up significantly after the federal government issued lockdown guidance in March 2020 in response to the global COVID-19 pandemic.

Shutdowns across the globe caused disruptions in shipping food from producers at manufacturing facilities to warehouses and supermarkets, as people were told to stay home to prevent the spread of the virus.

Prices at first spiked in April 2020, but the biggest increases happened in 2022, as inflation started to creep in and the Federal Reserve tightened monetary policy. These and a confluence of other factors led to spectacular increases in food prices not seen in decades.

A multitude of factors coalesced in the months and years following the March 2020 lockdown, causing grocery prices to skyrocket and remain at high levels. Supply chain issuesThe pandemic caused disruptions in the supply chain. For some time, workers weren’t able to return to the farms or factories to produce the food that normally would be on Americans’ tables. Certain vegetables, such as kale, were in short supply, and a worker shortage led to limited production of cereals and baked goods at food processing facilities. Transportation delays exacerbated these shortages.

Food supplies weren’t enough to keep up with demand, and that led to higher prices. Delays in processing meats and eggs, for example, pushed up prices. Globally, borders were closed for many countries, and that led to higher prices for imported goods such as coffee and sugar.

The costs of energy, raw materials, and labor rose, and manufacturers passed those expenses on to retailers, who in turn passed them on to consumers. The same phenomenon occurred in transportation: As fuel prices increased, those costs were passed on, eventually to consumers.

The overall rising costs of living affected almost every sector of the economy. After the U.S. started to relax its borders, and flight travel eased, Americans started to feel life returning to normal, and that sudden boost in demand strained an already burdened supply chain that had yet to normalize. With the pandemic’s severity subsiding in 2021 and 2022, people wanted to spend, and that led to a sudden surge in prices, from homes to fuel to groceries.

The annual inflation rate, as represented by the consumer price index for all urban consumers, moved up from 1.4% in 2020 to 7.0% in 2021 and then slipped to 6.5% in 2022 and 3.4% in 2023.

By comparison, the subindex for food — the Consumer Price Index for All Urban Consumers: Food in U.S. City Average — rose 3.9% in 2020. Food prices jumped by 6.3% in 2021, and then by 10.4% in 2022. But for 2023, food prices slowed their increases, with the index up 2.7%.

Food is a major component of the CPI, but housing is even bigger. We can’t live without food, and every price increase is a dent in the pocket and takes away money that can be used for the purchase of other goods or payment of services.

TheStreet compiled data by the U.S. Bureau of Labor Statistics — the publisher of the CPI — on food prices downloaded from the St. Louis Federal Reserve’s website, and the data show a rapid rise of prices not seen in decades.

The CPI food subindex rose almost 25% in March 2024 from March 2020, which was the start of the declaration of the pandemic. This CPI subindex hadn’t risen that much over a four-year period since 1979-1983, a period of extreme inflationary pressures and a tight monetary policy by the Fed that belonged to the Great Inflation era.