Steady Food Prices Hide Looming Inflation Threat

Food-at-home prices held steady in August, but experts warn that higher energy costs could soon drive up grocery bills. According to data from FMI, The Food Industry Association, food-at-home prices rose by only 2.2% year over year in August, down from 2.7% the previous month.

Ricky Volpe, a professor of agribusiness at Cal Poly, noted that while the flat reading is good news amidst high inflation, it conceals wide differences across categories. Beef and produce prices eased, but poultry, fats, oils, butters, preservatives, and dairy moved higher.

The bigger concern is energy costs, which have increased in crude oil, diesel, industrial electricity, warehousing, cold storage, and long-haul trucking sectors crucial to the food supply chain. Volpe pointed out that even a small increase in energy prices can drive up food costs by 3-4%.

FMI's USDA food dollar analysis shows how these costs trickle down to consumers. If energy prices double, food prices could rise by several percentage points due to compounding effects from agricultural production being energy-intensive.