Title: Food Prices Increases

Description: Food prices generally increase by about 2 percent each
year. But from 2021 to 2022, food prices rose by 11 percent, the largest
annual increase in over 40 years. What caused this major increase, and
what can be done about it? We'll find out from GAO's Steve Morris.

Related GAO Work: GAO-23-105846, Food Prices: Information on Trends,
Factors, and the Federal Role

Released: March 2023

[Music]

[Steve Morris:] Many factors impact the food supply chain, which in turn
really can affect the prices you and I pay at the grocery store.

[Holly Hobbs:] Hi and welcome to GAO's Watchdog Report. Your source for
news and information from the U.S. Government Accountability Office. I'm
your host, Holly Hobbs. Food prices generally increase by about 2
percent each year. But from 2021 to 2022, food prices rose by 11
percent, the largest annual increase in over 40 years. What caused this
major increase? Was it just overall inflation? And what, if anything,
can be done about it? We'll find out from GAO's Steve Morris, an
agriculture expert. Thanks for joining us.

[Steve Morris:] Thanks for having me, Holly.

[Holly Hobbs:] So, Steve, what is causing food prices to go up?

[Steve Morris:] Well, Holly, you know, that's a great question. And,
there isn't one single factor that's causing food prices to go up.
There's really many factors along the food supply chain--which extends
all the way from the farm to the processor to the grocery store. Just to
give you some examples, you know, some of these things include, like,
the costs and availability of animal feed, fertilizer, energy,
transportation, labor--all of which can affect food prices. There's
certain factors--such as weather and climate and disease-- that have
really pose some long-standing challenges for agriculture and food. And
then there's other things like the COVID-19 pandemic and the
Russia-Ukraine conflict that have been more recent and obviously more
dramatic, right? But let me give you a real life example so you can
understand how these things can affect food prices. So, last year's
outbreak of avian flu forced many producers to euthanize millions of
chickens, right? So that, in turn, reduced the nation's supply of eggs.
And as a result, egg prices soared.

[Holly Hobbs:] So, do we know if prices will continue to increase or
have we seen the worst of it?

[Steve Morris:] Well, you know, according to the USDA, the prices are
expected to grow more slowly in 2023 than it did in 2022. But it's still
going to grow more than the historic annual average of 2 percent. When
you look at the forecast for this year's prices, they're predicted to
increase anywhere from 5 to 10 percent, probably settle around 8
percent. So they're still going to be really high.

[Holly Hobbs:] Were their types of food that increased more than others
or was it just across the board?

[Steve Morris:] Well, Holly, you know, it was actually both. When you
look at food prices across the board, they increased. But also the
extent of the increase varied by the type of food. Prices for specific
products like cereal and baked goods actually increased by 13 percent.
Meat, poultry, fish increased by about 10 percent. And fruits and
vegetables increased by about 9 percent. In addition, food prices also
varied depending on where folks lived across the country. Food prices in
Detroit, for example, rose over 14 percent, while prices in Miami and
Fort Lauderdale only rose about 5 percent. So, you know, a lot of
variation. And some of that variation really could be attributed to
retailers passing on their costs for either transportation or some of
their retail overhead onto consumers.

[Holly Hobbs:] Do we know how this is affected Americans and who may
have felt the price increase the most?

[Steve Morris:] We didn't evaluate the impact of the recent increases of
food prices on American households specifically. But we do know
this--the overall increases in the food prices posed a hardship for many
folks in the U.S., right?  Particularly low-income consumers. So, for
example, while the average U.S. consumer spends about 10 percent of
their income on food, low-income consumers can spend up to 30 percent of
their income on food. 

{MUSIC}

[Holly Hobbs:] Steve just told us that while food prices increased
dramatically last year, they are expected to continue increasing by more
than the typical 2 percent average. And this can have disproportionate
impact on some Americans based on their income, diet, and where they
live. So, Steve, what's the federal role in addressing the causes for
food price increases?

[Steve Morris:] The federal government doesn't control food prices
directly, but it can indirectly affect food prices through their support
of the food supplies chain. So just to give you some examples, Holly. So
agencies may invest in agricultural activities. They can provide
technical assistance and guidance to producers and processors. They also
conduct research and share some information with farmers and businesses.
And, they can set standards to ensure the safety of food and also ensure
market competition. So all these activities working together ultimately
can have some impact on food prices.

[Holly Hobbs:] And so has the federal government taken action on food
price increases?

[Steve Morris:] Well, yes, Holly, you know, the federal government
really took a number of important actions in response to the food price
increases and the supply chain disruptions we all experienced in 21 and
22. Just a couple of really important examples, I think. First, during
the height of the pandemic, really, and really even the start, FDA
allowed producers to divert food that was meant for restaurants to
grocery stores, right?  And that ensured food availability for a lot of
consumers during the pandemic. USDA also increased the nutrition
assistance benefits to folks to ensure that really the most vulnerable
populations had access to food. So two really important examples of
federal action.

[Holly Hobbs:] Steve, last question. What's the bottom line of this
report?

[Steve Morris:] We've all experienced record high food prices in the
last year. Many factors impact the food supply chain, which in turn
really can affect the prices you and I pay at the grocery store. Some of
these factors, like climate and weather, are really long standing
issues. Others, like the Russia-Ukraine conflict, are more recent. While
the government cannot directly control food prices, it can take some
actions, and it has done so to support the food supply chain and
mitigate the impact of the rising prices we've seen. Unfortunately, the
government estimates that food prices are going to continue to remain
high during 2023.

[Holly Hobbs:] That was Steve Morris talking about GAO's recent report
on food prices. Thanks for your time, Steve.

[Steve Morris:] Thank you so much, Holly.

[Holly Hobbs:] And thank you for listening to the Watchdog Report. To
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