As part of broader plans to lower the cost of living for Americans, Harris said in her economic speech last week in Raleigh, North Carolina, that she intends to combat gouging in food prices during her first 100 days in office.
Harris plans to “make cost-cutting and economic security for Americans one of her top priorities” and tackle “high-cost items” such as food, she said in her speech to the Washington Post.
She argued that although the supply chain has improved since the COVID-19 pandemic, “prices are still too high. A loaf of bread costs 50% more today than it did before the pandemic. Minced meat has become almost 50% more expensive.”
She pointed out that while some grocery chains are passing on their savings to Americans, “many are not,” citing record profits at food companies.
In contrast to the higher costs of consumer food, food prices represented “a bright spot”
In a prepared response to Harris’ plans, Leslie Sarasin, president and CEO of the Food Industry Association (FMI), said that while inflation has increased the prices of consumer goods, food prices represent “a bright spot,” as shown by 2024 Consumer Price Index (CPI) data.
Sarasin emphasizes: “The consumer price index for July showed an annual inflation rate for food consumption of 1.1%, which is below the general inflation rate of 2.9%,” says Sarasin.
However, Harris compares current food prices to pre-pandemic levels, stressing that while inflation may be easing, food costs are still higher than before the pandemic.
Sarasin added: “Profit margins in food retail are and always have been extremely low – last year they were only 1.6 percent,” according to FMI data.
Sarasin pointed to the food industry’s ongoing efforts to fight inflation and reduce costs for consumers “amid fierce competition.” She stressed that higher labor costs, turbulent energy prices, unpredictable environmental events, supply chain disruptions and “an unprecedented level of regulatory burden” had led to an increase in food production costs.
In response to “misleading practices such as price gouging,” Sarasin stressed that these were illegal and had “no place in our branches.”
“It is both inaccurate and irresponsible to confuse an illegal activity such as price gouging – a defined legal term that includes specific violations of trade law – with inflation, which is a broad macroeconomic measure of the increase in consumer prices over time due to cost pressures in the supply chain. In the context of food, inflation affects how far the dollar stretches when purchasing food,” she said.
Sarasin stressed that it is essential for Americans and the food industry “that our conversations about food prices are based on reality and data, not rhetoric.”
The pressure on supply chains has increased costs, but especially for manufacturers and retailers
Ricky Volpe, associate professor of agricultural economics at California Polytechnic State University, echoed this view, adding in an interview with FMI that “recent media coverage of the impact of inflation on food prices often does not reflect the economic subtleties and nuances that affect the true cost of food in America.”
Volpe explained that while the average American income increased by 28% between March 2020 and June 2024, food prices increased by 24.6% over the same period, according to data from the US Bureau of Economic Analysis Personal Disposable Income, which measures the average level of income after taxes. Volpe stressed that while food prices may appear to have increased, the actual cost of food relative to wages has fallen by almost two percentage points over the same period.
“As a result, consumer demand remained high and families were able to meet their food needs even as prices rose,” he said.
While it is true that food prices have risen relative to wages, Volpe explained that the increased costs in the supply chain have largely been absorbed by grocers and producers.
“The truth is that when producer costs rise, consumer prices also rise – that is a normal market dynamic,” he added.
Volpe detailed supply chain pressures, such as rising transportation costs due to a shortage of truck drivers and limited refrigerated truck capacity, higher labor costs due to labor issues, higher turnover rates and severe weather that have contributed to rising prices for manufacturers and retailers.
Based on food production data from the Producer Price Index (PPI), which measures the prices businesses pay for the goods and services needed to produce their products, and data on household food in the Consumer Price Index between March 2020 and June 2020,4 consumer prices rose slightly less than producer input costs, while food costs rose 25.3% and producer costs rose 28%, Volpe explained.
“This suggests that not only are grocers absorbing some of the cost increases in the supply chain, but the prices consumers are paying are not the result of exploding profits. Rather, they are the result of inflationary pressures throughout the supply chain that are increasing costs for companies that produce and sell food,” he said.
For example, producer costs for fruit and vegetables rose by 37.1 percent over the four-year period, while consumer prices rose by 16.2 percent. According to the PPI data, this represents a difference of 20.9 percentage points.
This suggests that the supply chain is absorbing a large portion of the input costs to avoid passing on significant price increases to consumers,” Volpe added.
