High Prices, Empty Shelves
January 27, 2022
U.S. consumers have noticed empty shelves at grocery stores in recent months, reminiscent of the early days of the Covid-19 pandemic. At the same time, food costs have risen dramatically, cutting into household budgets and forcing some families to make difficult choices on how much and which foods to buy. What is causing these changes, and what is the Biden administration doing to address them?
Q1: What is causing the recent increases in food prices and empty grocery store shelves?
A1: What consumers are seeing at the grocery store—both food shortages and higher prices—is in large part due to the Covid-19 pandemic. The recent surge in Covid-19 cases has impacted the entire food supply chain, causing everyone from farm laborers, processing plant workers, truckers, and grocery store employees to call in sick. The U.S. food supply chain is highly efficient with low levels of redundancy, meaning that a seemingly small disruption in one part of the system can have cascading effects and cause food shipments to be delayed by days or weeks. Extreme winter weather in parts of the country has exacerbated transportation delays.
On the demand side, the latest wave of the pandemic has prompted more families to cook at home, driving up demand for grocery store products. Coupled with increased spending as the economy continues to recover from the initial impacts of Covid-19, this has contributed to food price inflation—along with inflation in most other sectors of the economy. The Bureau of Labor Statistics’ Consumer Price Index showed that food prices increased 6.3 percent from December 2020 to December 2021, with grocery prices up in almost every category in recent months. Some food prices have risen even more—chicken, for example, costs 10.4 percent more on average than it did a year ago. The past year saw the highest price increases for consumer goods since 1982, concerning many economists, policymakers, and the general public.
As U.S. consumers experience significant price spikes in other areas of the economy—for example, gasoline prices are 49.6 percent higher, electricity is 6.3 percent higher, and transportation services are 4.2 percent higher than a year ago—these costs also increase the bottom line for producers, driving food prices even higher.
Q2: How has the federal government responded to supply disruptions and rising food costs?
A2: In the short term, the Federal Reserve (the Fed) plans to increase interest rates several times in 2022, which should slow inflation. The Fed kept interest rates at extremely low rates throughout the pandemic in an effort to stimulate economic growth and counteract the effects of Covid-19 on the U.S. economy. The Fed is now considering more aggressive courses of action to protect U.S. producers and consumers from sustained price hikes. Federal Reserve chairman Jerome Powell said in a press conference on January 26 that the central bank may raise interest rates beginning in March and could raise rates three to four times in 2022, depending on how the economy responds to changes.
To maintain food security for low-income consumers, Congress temporarily increased Supplemental Nutrition Assistance Program (SNAP) benefits by 15 percent in response to the pandemic. The increase expired on September 30, 2021, leaving many low-income families struggling to afford food amid the recent price increases. The U.S. Department of Agriculture (USDA) is presently reevaluating the value of SNAP benefits across the board, as directed by the 2018 Farm Bill. Last updated in 2006, SNAP benefits are likely insufficient to meet families’ food needs, particularly in a period of high inflation; the USDA will conclude its reevaluation in 2022. The Child Tax Credit in the American Rescue Plan provided some relief to families with children in 2021, sending automatic $250–$300 monthly payments per child. However, these payments ended in December 2021.
In the longer term, the Biden administration has prioritized increasing competition in order to build more resilient supply chains, protect small businesses and independent producers, and decrease prices for consumers. In his first year, President Biden announced multiple strategies and an executive order aimed at increasing competition throughout the U.S. economy, including in the food sector. Most recently, he announced the Action Plan for a Fairer, More Competitive, and More Resilient Meat and Poultry Supply Chain, which will dedicate $1 billion of American Rescue Plan funds for the expansion of independent meat and poultry processing capacity. If it has the intended effect, this funding should promote competition in the meat industry to increase producer incomes while providing consumers with more affordable options. However, it will likely take years for consumers to see the impacts of these changes on grocery store shelves.
Q3:What should U.S. consumers expect to see in 2022?
A3: Consumers will likely stop seeing empty grocery store shelves within the next couple of months, as the Omicron variant surge passes, winter weather subsides, and food producers, distributors, and retailers return to full capacity. The National Grocers Association expects supply chain challenges to continue sporadically for at least a few more weeks, impacting different areas at different times.
It will likely take longer for higher prices to return to pre-inflation levels. Predictions vary, but most economists expect inflation to ease in the coming months. Month-to-month price increases have already slowed, indicating that inflation may be reaching a peak. Some have predicted that once the nation gets beyond the current Covid-19 surge, prices will stabilize and begin to drop within three to six months.
Q4: How does this affect U.S. household food security?
A4: Across-the-board inflation stretches families’ budgets and makes it harder to afford food. The entire U.S. public is feeling these changes, but low-income households have been hit particularly hard since they have less disposable income to absorb price changes. Wages have also been rising, but not quickly enough to keep up with current inflation. As a result, almost half of U.S. households reported experiencing hardship due to inflation in December.
More households turned to food banks to make ends meet during the pandemic, but food banks are also feeling the effects of the recent disruptions. Supply shortages, workers out sick, and price increases have made it difficult for many charitable food organizations to keep up with community needs.
With many pandemic support programs expiring, more U.S. families will struggle to put food on the table in the coming months until the Omicron surge passes and supply chains and prices stabilize.
Jamie Lutz is a research associate with the Global Food Security Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Caitlin Welsh is the director of the CSIS Global Food Security Program.
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