Largest annual increase in grocery prices since 2011
Grocery prices will rise by a higher-than-average 3% this year, due largely to the coronavirus-propelled surge in the cost of meat, poultry, and fish at the supermarket, forecast the USDA on Thursday. It would be the largest increase since 2011 and a rare recent year in which the inflation rate for groceries exceeds the rise in the price of “food away from home,” the category that includes restaurants and fast-food outlets.
Americans are spending a larger share of their food dollar at the grocery store this year, a reflection of stay-at-home orders and the virtual shutdown of the food service sector in March as the coronavirus spread across the country. Meat, poultry, and fish account for one-fifth of grocery spending, and prices for those items are up across the board, said the monthly Food Price Outlook.
Beef prices will rise by 8%, pork by 4.5%, and poultry by 3% this year compared with last year, said the USDA. The increases were especially sharp this spring, when cattle and hog packing plants slowed production because of coronavirus outbreaks among workers and some grocery chains limited meat sales to customers. Beef and veal prices soared by nearly 11% in May alone.
“Processors have implemented health protocols for dealing with COVID-19 that might have hindered their ability to process cattle and hogs, although they have recouped much of the lost slaughter capacity,” said the Food Price Outlook. A weekly USDA report says red meat production — beef, veal, pork, and mutton — since Jan. 1 is 2% behind 2019’s pace. Cattle slaughter is down by 6% and hog slaughter by less than 1% from last year.
Fish and seafood prices will increase by 2% this year, a larger increase than previously forecast but below the 20-year average of 2.4%. For beef, pork, and poultry, this year’s increases will exceed their long-term averages. For beef and pork, the increases would be double the average annual rate.
Fruit and vegetable prices were forecast to rise by a modest 1% this year. “With some exceptions, most fresh-market vegetable growers rely on human labor to produce and place a crop into supply channels. It is anticipated that skilled labor will be scarcer and procedural changes to comply with recommended social distancing may reduce productivity,” said the USDA.
At the same time that grocery prices are rising, the food insecurity rate has doubled since the coronavirus struck. The COVID Impact Survey said that more than 10% of the people it surveyed early this month in New York City, Baltimore, Chicago, and Birmingham, Alabama, said they had received assistance from a food pantry in the preceding week.
If the USDA’s forecast proves true, 2020 will see the largest rise in grocery prices since the rise of 4.8% in 2011. The long-term average is 2% a year.
Food prices usually mirror the overall U.S. inflation rate, which is forecast at less than 1% this year. Since 2009, “food away from home” prices have increased at higher annual rates than grocery prices. The USDA attributes the difference to factors outside the cost of food, saying that “restaurant prices primarily reflect labor and rental costs.”
For this year, the price of “food away from home” is forecast to rise by 2%, a smaller increase than the 20-year average of 2.8%.