MSU has a satellite uplink/LTN TV studio and Comrex line for radio interviews upon request.
This is part of Michigan State University’s “Ask the experts: 2024 election issues” series where experts answer questions on specific and relevant issues that affect people’s day-to-day lives. This one focuses on increased food prices and the food economy.
Newswise — EAST LANSING, Mich. – The economy is always a hot topic in presidential elections and, this year, food prices have taken center stage. After a period of historically high inflation in 2022, where grocery prices soared by over 11%, the current rise in food costs has slowed to around 2%. However, many families still feel the pinch at the grocery store. With both parties making food prices a campaign issue, the conversation around what’s really driving costs — and what, if anything, elected officials can do about it — is heating up.
, professor and Noel W. Stuckman Chair in Food Economics and Policy at Michigan State University’s , breaks down the complexities of food prices during this election season and what presidential candidates are saying about it.
Why have food prices increased in recent years?
The high food prices we’ve experienced over the past few years have been driven by a perfect storm of factors that have affected both the supply and demand for food. This all began during the COVID-19 pandemic, when shifts in consumer behavior, supply chain disruptions and rising labor costs made it difficult to get products on shelves. On top of that, Russia’s invasion of Ukraine in early 2022 caused a surge in global commodity prices, especially grains and vegetable oils. We also experienced severe droughts across major agricultural regions and an outbreak of bird flu, which pushed prices higher for a variety of products including eggs.
On the demand side, households have been spending more on food in recent years compared to pre-pandemic times, even when adjusted for inflation. This is a result of some households accumulating savings during the pandemic when many people couldn’t engage in the service economy, and partly due to the government stimulus checks that many households received. When you have shocks of this nature to both the supply and demand side of the market, prices have nowhere to go but up.
Why is there a disconnect between the recent positive news about food inflation and the sticker shock consumers still feel at the supermarket?
The disconnect arises because consumers really care about the price level, not the rate of increase, which is what inflation measures. Even though food price increases have slowed, prices are still much higher than they were four years ago. Moreover, a 2% increase today feels more significant than the same 2% increase last year, because it’s on top of an already elevated price base.
Additionally, the nature of our interactions with food prices plays a big role. We buy groceries weekly, or even more frequently, which makes food prices more noticeable compared to other expenses like haircuts, movie tickets or buying a car. As a result, the supermarket has become a symbol of inflation in the U.S. Despite food inflation having come down, consumers are reacting to and feeling the cumulative impact of inflation over several years.
On the campaign trail, former President Trump has suggested using tariffs to lower the cost of food. Would tariffs help reduce food prices?
Tariffs on imports as a tool to bring down food prices will very likely have the opposite effect — they will make food more expensive.
Many U.S. food producers rely on imported goods like fertilizer, equipment and packaging materials to keep their operations running. When tariffs are placed on these imports, production costs go up, and those costs are passed on to consumers in the form of higher prices. Additionally, we tend to import food products that we are not able to grow domestically — like coffee that grows in warmer climates. Tariffs are taxes on imported goods, so rather than easing inflation, they can worsen it.
It’s also important to keep in mind that other countries won’t sit back quietly. They will retaliate. During the U.S.-China trade war, retaliatory tariffs cost American farmers over $25 billion in lost exports to China. The U.S. government responded by providing farmers $23 billion in subsidies under the Market Facilitation Program, funded by taxpayers. The bottom line here is that tariffs won’t lower food prices. They can make inflation worse and end up costing both producers and consumers more in the long run.
Vice President Harris has proposed a federal price-gouging ban. Would this help lower food prices?
This proposal addresses concerns about ‘greedflation’ and corporate profits driving food prices. However, the situation is more complex, and this proposal could lead to some unintended consequences. Many food companies have faced significant cost pressures due to supply chain disruptions, rising wages and global commodity shocks, like those triggered by the war in Ukraine. Grocery retail, in particular, operates on relatively slim profit margins, making price increases hard to avoid when costs rise. While some companies did see profits rise during the pandemic, this was largely due to increased grocery spending as consumers shifted away from dining out during the pandemic. Data on gross profit margins — the share companies keep after covering production and stocking costs — shows that these haven’t significantly increased, suggesting that ‘corporate greed’ doesn’t fully explain what’s driving inflation.
A federal price-gouging ban could lead to unintended consequences, such as shortages or reduced product quality, as companies may struggle to cover rising costs. Defining and enforcing price gouging is no easy task. Prices fluctuate due to a range of factors, and monitoring and enforcing a ban on price gouging would be logistically difficult and very costly.
Have wage increases kept up with rising food prices?
While much of the attention has been on food price increases, what really matters to consumers is how far their hard-earned dollars go at the grocery store. The good news is that wages are starting to catch up with food prices. Since January 2020, grocery prices have risen by more than 25%, but by some measures, purchasing power today is about the same as it was before the pandemic. This means that the number of hours a worker needs to put in to afford groceries is roughly equivalent to what it was in early 2020.
However, it’s important to understand the delicate balance here. While higher wages are good for workers, they can also contribute to higher food prices, particularly because food production is so labor-intensive. So, while wage growth helps consumers keep up with rising prices, it can also push food prices higher.
What advice would you give to the next president on the issue of high food prices?
In advising the next president on high food prices, it’s important to understand that they have limited influence over food prices, especially in the short term. However, there are strategic actions that can help address some of the underlying causes in the long run and provide immediate relief to those most affected. One critical area they could focus on is ensuring our food system is resilient to future shocks, like climate change. For example, investments in agricultural innovations can better prepare our producers for a changing climate and help reduce labor costs, which are significant drivers of food prices.
Another key focus should be on strengthening and expanding social safety nets like the Supplemental Nutrition Assistance Program, or SNAP, which directly supports the most vulnerable and ensures food affordability. Expanding these types of programs will provide critical assistance to those most affected by higher prices.
Finally, fostering economic growth is key to helping wages keep pace with rising costs. As wages rise, consumers will have more purchasing power, easing the burden of higher food prices. In my view, making our food system more resilient to future shocks, reinforcing social safety nets and driving economic growth should be central to any strategy on this issue.
Read on .
###
Michigan State University has been advancing the common good with uncommon will for more than 165 years. One of the world’s leading public research universities, MSU pushes the boundaries of discovery to make a better, safer, healthier world for all while providing life-changing opportunities to a diverse and inclusive academic community through more than 400 programs of study in 17 degree-granting colleges.
For MSU news on the web, go to or
RSS