A rise in food prices makes for a less than merry holiday season.
Grocery prices rose 0.4% in November, according to the Consumer Price Index, released this week by the U.S. Bureau of Labor Statistics.
Eggs made one of the biggest jumps at 8.2% over the month, and 37.5% over the past year, providing challenges for people trying to eat a somewhat cheaper protein and families cooking holiday foods such as sugar cookies and challah.
Although the increase in food prices has moderated a bit from past years, they are still more than 20% higher than they were before the pandemic, according to David Ortega, at Michigan State University.
“It was a key issue in the election in terms of people really feeling that sticker shock at the grocery store,” said Ortega, a food economist.
President-elect Donald Trump vowed to bring down prices during his campaign and blamed the Biden administration for how they reached this point. But in an interview with TIME published this week, Trump said he does not believe his presidency would be a failure if grocery prices do not come down.
“It’s hard to bring things down once they’re up,” he said.
Price changes to understand before you set the holiday table
The increase in grocery, or food at home prices, was partly driven by the rise in egg and beef prices, Ortega said. He said the price of holiday roast has been affected by drought and high feed prices. This year, the inventory of beef cattle was the smallest beef herd since 1951.
“On eggs, the story continues to be bird flu together with increased consumer demand given the holiday season,” he said following Wednesday’s release of the latest Consumer Price Index. “And for beef the issue is supply — high input costs and decisions that beef producers made a couple of years back when they were facing drought and high feed prices which has reduced beef supply, and this in turn is affecting beef prices.”
The latest food price numbers presented a mixed bag for holiday shoppers looking to bake treats this month. Flour and prepared four mixes fell 1% and bread decreased 1.3%, while sugar and sweets rose 0.2%, and butter ticked up 1.5%.
Oranges, including the popular stocking stuffers tangerines, fell 1.8% in the latest Consumer Price Index report.
The rise in cost of eating your meals at home compared to the rise in cost of eating out is also getting narrower, with the gap in inflation between restaurant menu prices and grocery year-over-year prices being the narrowest it has been since May 2023, according to Supermarket News. Food at home in previous reports rose 0.2% and 0.4% compared to 0.2% and 0.3% for the past two food away from home reports.
Are companies profiting off of uncertain times?
Rakeen Mabud, chief economist at the Groundwork Collective, a left-of-center economic think tank, said that just a few seed producers, meatpackers, and grocers dominate the food industry, which is a key part of the story of what drives grocery prices. This hurts lower-income shoppers the hardest. Oklahoma, Iowa, and Arkansas are some of the states most dominated by a single grocer, such as Walmart or Hy-Vee.
“Across the food and grocery industry, we have a sector that is deeply consolidated,” Mabud said. … And so when you have big companies controlling such large chunks of the market, we know that they have used things like inflation, things like supply chain shocks to jack up prices far beyond what their input costs to justify.”
Mabud said that when there is this level of market concentration, companies can signal to each other in earnings calls that they are going to start raising prices.
“If you know that your only other competitors are also raising prices, there’s kind of no reason for you to try to undercut them if you both hold giant shares of a market,” she said.
An economic paper published this year found that companies are able to coordinate price increases around cost shocks and increase profits from these events. Mabud said the holidays provide plenty of opportunity for the food industry to raise prices on things people ordinarily don’t buy and don’t have a price comparison for during a less in-demand season.
“Grocers and the food industry kind of know that they know that they have more information about the underlying cost of a good than a consumer who only comes to buy the Christmas ham once a year. And so they can take advantage of that,” she said.
An unhappy new year for grocery shoppers
Economists are watching out for how the next administration will impact food prices.
Trump’s promise to impose heavy tariffs on the U.S.’s biggest trading partners – Mexico, Canada and China – are expected to drive up the cost of everything, including groceries.
Products the U.S. can’t produce year round, like fruit and coffee, will be affected, Ortega said.
“There’s still a lot of uncertainty in terms of whether these tariffs are really going to be implemented or are they a negotiating tool? But that creates a lot of uncertainty,” he said. “Even that amount of uncertainty can lead to a rise in costs as companies prepare for the potential of these tariffs taking place.”
Trump’s expected policy of mass deportation of immigrants will also affect the agriculture industry, in addition to the major human rights implications.
“If there’s a mass deportation that is a shock to the labor supply and the agricultural sector. And that will lead to an increase in costs as producers and companies have to offer higher wages to attract enough labor. Ultimately that gets passed down to the consumer in the form of higher prices,” Ortega said.
Mabud is also concerned that expected tariffs could mean companies take advantage of the policy change well beyond the actual financial impact to their business.
“It’s a policy change where consumers don’t necessarily know how much the price of an avocado is going up because of a tariff versus a supply chain issue versus the grocery store just wanting to increase the price,” she said.
Patricia “Pogo” Overmeyer, 65, who works as a lawyer in Arizona and lives with her retired husband, said she has always been focused on how to save money on groceries. But she said she has become even more thrifty since inflation worsened.
She said she’s been using more meatless meals and stocks up on holiday food all year round when prices are low, some of which she freezes and cans.
“Once I retire, our income will not be as high,” she said, “Most likely I will forgo some foods or make substitutions. It’s anyone’s guess as to what we will be paying for groceries.”
