Why are grocery prices still rising?

(The Hill) — Americans continue to pay more at the grocery store as surging food inflation shows no signs of slowing down. 

Grocery prices rose 13% over the last year and 0.7% in September alone, outpacing the annual 8.2% inflation rate for all consumer products, according to the most recent Labor Department data. 

The price of fruits and vegetables increased by 10.4% annually, while milk rose 15.2% and eggs soared 30.5%. 

Prices could keep rising well into next year, experts say, as it’s unclear when fundamental issues like Russia’s invasion of Ukraine, extreme droughts and supply chain snarls will let up.

“What we’re hearing and what we expect is it’s going to be a pretty rocky fall,” said Andy Harig, vice president of tax, trade, sustainability and policy at the Food Industry Association. “I think we’re probably into the end of the second quarter next year before we get to where it’s a little bit more stable footing.”

Experts are concerned about the threat of a recession coupled with high food prices, which rose last month even as the cost of gasoline, cars and other products fell. 

While the Federal Reserve’s interest rate hikes are slowing demand for certain discretionary goods, people will always need to buy food, limiting the impact of monetary policy on prices.

“When food prices increase, it’s an even higher percentage of lower-income households’ budgets,” said Jordan Teague, policy director at anti-hunger organization Bread for the World. 

“If people need to pay rent or they have a medical bill, they have to make really hard decisions about what they’re not going to pay for, and oftentimes that means buying cheaper but less healthy foods or not buying as much food.”

War in Ukraine stifles supply

Russia’s invasion hit the global food system with a double whammy by reducing food exports from Ukraine — a top supplier of wheat and cooking oils — and prompting Russia to slow its fertilizer exports. 

Fertilizer prices surged to record levels this year after Russia, the world’s top fertilizer exporter, halted its shipments in response to international economic sanctions. Belarus, another top fertilizer producer and an ally of Moscow, has also limited its exports, as has China. 

That’s made growing crops more expensive than ever. Higher fuel prices brought on by Russia’s invasion make it costlier for farmers and processors to operate equipment and for manufacturers to produce food packaging.

“People knew going into the summer that we should plant extra because there’s going to be this huge global demand. But planting is so expensive now that in a lot of cases they didn’t have the money,” Harig said. 

Global wheat prices spiked following Moscow’s invasion, which blocked Ukraine from accessing the Black Sea, its main trade channel. That’s translated to massive price increases for flour, cereal and bread in the U.S. and abroad. 

U.S. producers have upped their exports to African countries that rely on Ukraine for food and are facing widespread famine. Russia and Ukraine struck a deal to allow for exports to proceed, but Moscow has threatened to undo it and recently annexed several regions of Ukraine that account for roughly one-fifth of the country’s wheat supply. 

Supply chain disruptions remain a problem

Farmers and food processors have reported difficulties transporting grain, livestock and other products amid a shortfall of truck drivers, refrigerated trucks and railroad workers. 

Freight railroads, which transport roughly one-quarter of U.S. grain, have been plagued by reliability issues that prevent food from getting to its destination on time, further shrinking supply. The industry is scrambling to hire more conductors and engineers after laying off large numbers of workers in recent years. 

Since May, railroads on average failed to fulfill 14% of freight deliveries and arrived late 30% of the time, according to the Surface Transportation Board. Railroads were forced to briefly cancel agricultural shipments last month amid a potential rail strike, which was averted but could reemerge as a threat to the supply chain in mid-November. 

Barges, which transport 13% of U.S. grain, are the latest mode of transportation to face issues. Many barges are struggling to travel through the Mississippi River, a key agricultural channel, due to dangerously low water levels.

The situation is “especially problematic during the height of harvest season, when farmers are looking to move grain to storage facilities,” according to American Farm Bureau Federation economist Daniel Munch.

“Without relief, many producers will scramble to find places to store their goods or face exorbitant wait times and costs to acquire transportation,” he wrote in a post on Thursday.

Progressive lawmakers and advocacy groups have criticized large multinational corporations for failing to invest in resilient supply chains and instead using their excess funds to reward shareholders with stock buybacks.

Extreme weather and disease ravages farms

This year’s harsh droughts have devastated farms across the U.S., shrinking yields and ultimately driving up prices at the grocery store. 

Climate change has hit farmers in the American West particularly hard. That’s driven up the price of tree nuts, fruits and vegetables that are almost entirely grown in states plagued by drought. 

Top trade partners are also feeling the effects of heat waves. The price of coffee beans spiked this year after severe droughts hammered coffee crops in South America.  

At the same time, huge outbreaks of bird flu this spring contributed to a 17.2% hike in the price of poultry over the last 12 months as other meats saw smaller increases.

Turkey breast prices reached an all-time high in September — 112% pricier than the same period last year — after widespread outbreaks curtailed production, according to the Farm Bureau.