Rising Food Prices Eat Into Grocery Budgets

Despite promising signs in the Food Price Index, food and drink prices on the ground remain at wallet-sapping levels. According to the Bureau of Labor Statistics, prices have jumped more than 11% in the US since last year.

Unfortunately, the driving forces behind high inflation and bigger grocery bills are wide-ranging and complex. Here are the primary factors in play:

COVID-19

Think about what happened during lockdowns, when hundreds of millions of people had no choice but to cook and eat at home. As a result, grocery stores experienced a titanic increase in demand, while restauranteurs lost money if they could stay open at all.

Producers had to pivot fast, accommodate extreme labor turnover, cover training costs for new workers, and invest in products and processes to prevent contamination. Not only that, but with grocery stores requiring more supplies faster than ever, transportation costs also climbed.

These issues all played a crucial role in rising food prices. And while the pandemic seems to be under control nowadays, the food supply chain has yet to recover fully.

War in Ukraine

The Russo-Ukranian war has caused further chaos in this area because Russia and Ukraine account for over 25% of the world’s wheat exports, not to mention other staples, such as barley, corn, and sunflower seed oil.

Bans on Russian imports caused energy prices to spike by 19.8% between September 2021 and September 2022, which has had severe knock-on effects on food production and transportation costs.

Russian Sanctions

To add insult to injury, Russia’s also the world’s largest exporter of fertilizers. It exported $7.6 billion worth in 2020 alone. The fact these imports are no longer permitted has compounded a pre-existing fertilizer shortage.

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