The price of food

A quick trip to the grocery store can leave shoppers feeling sticker shock. Ever since the COVID-19 pandemic, food prices have sharply risen. We sat down with Professor Metin Çakır from the Department of Applied Economics to talk about the increasing cost of food and what it means for food insecure families. 

What are the major drivers of price inflation for food?

Food prices are influenced by many factors, but during 2020–2022, several stood out.

First, the COVID-19 pandemic disrupted both supply and demand. Early in the pandemic, supply chains were strained—processing plants slowed, transportation became more difficult, and labor shortages affected production. At the same time, consumers shifted sharply from eating out to eating at home, which changed demand patterns almost overnight.

Second, the federal government implemented large fiscal support programs to stabilize the economy. These policies helped households maintain their spending power, supporting food demand. At the same time, the money supply increased substantially. Many studies suggest that these demand-side factors were major contributors to overall inflation during 2021–2022.

Third, global shocks — including the Russian invasion of Ukraine — increased energy and commodity prices. Oil, wheat, corn, and fertilizer prices rose sharply, raising costs throughout the food system. 

Finally, there has been public debate about the role of market concentration and corporate pricing behavior. The research evidence is mixed. While food retail markets are concentrated, most empirical studies do not find strong evidence that “price gouging” or “greedflation” was a primary driver of the recent food inflation episode.

Are we still feeling the impact of price inflation from the COVID-19 pandemic?

Yes — although the mechanisms have changed.

The initial disruptions in 2020 were relatively short-lived in many markets. Meat prices, for example, spiked when processing plants shut down, but those supply chain effects largely normalized.

However, the broader inflation that emerged in 2021 and 2022 — fueled by strong demand, fiscal stimulus, and global energy and commodity shocks — led to permanently higher price levels. Even though inflation rates have slowed, food prices remain elevated compared to pre-pandemic levels.

In other words, prices are not rising as quickly now, but they have not returned to where they were before the pandemic.

What foods experienced the most cost inflation?

Inflation varied across categories.

• Meat and poultry experienced sharp early spikes due to processing disruptions.
• Eggs saw extreme price increases in 2022, largely due to Highly Pathogenic Avian Influenza reducing the laying hen population.
• Products heavily dependent on global commodities — such as wheat-based foods — were affected by global grain and fertilizer price increases.
• Energy-intensive products and those requiring significant processing and transportation were also affected when oil prices rose.

Overall, highly processed foods often reflect higher marketing, labor, and energy costs, which make them sensitive to broader economic conditions.

After food costs rise, do they ever come back down?

Sometimes — but not always.

Food prices can fall when commodity prices decline, supply improves, or demand softens. We have seen this in specific categories, such as eggs, where prices eventually fell after supply recovered.

However, food prices often show “stickiness.” When costs increase — especially labor or structural costs — prices tend to remain at the higher level even after inflation slows. So while the rate of inflation may fall, the price level often remains elevated.

Post-pandemic, have we seen changes in food insecurity?

Yes. After declining during the pandemic — partly due to expanded nutrition assistance programs and stimulus payments — food insecurity increased again in 2022.

As temporary federal support programs expired and food prices rose, many households experienced renewed financial strain. Because low-income households spend a larger share of their budgets on food, they are disproportionately affected by food price inflation.

Determining how much of the recent increase in food insecurity is due to higher prices versus the expiration of temporary benefits is an important area for ongoing research.

Anything else you want people to know about food prices or food insecurity?

Two broader points may be helpful: 

1. Food prices are shaped by the entire supply chain. Farm prices are only one piece. Processing, transportation, retail labor, energy, and marketing make up a large share of the final food dollar.
2. Food price inflation matters most for vulnerable households. Even moderate increases can have significant impacts, as food is a necessity and accounts for a larger share of lower-income families' budgets.

Understanding what drives food inflation helps policymakers design better responses — whether through targeted nutrition programs, monitoring market conditions, or improving supply chain resilience.