Food prices in America are down for the longest period in about 60 years. Price drops, most notably for beef, eggs, and dairy, have occurred over the course of 2016 and 2017. For 19 months straight, the U.S. government reported declines in the food consumer price index, which compares supermarket prices with what they were a year earlier.
“It is rather a unique period, something certainly I’ve never seen in my 37 years,” says Brian Todd, president and CEO of The Food Institute, an industry research organization. According to data from the Bureau of Labor Statistics, the last time the country went through such a long deflationary stretch in groceries was in the mid-1950s.
Typically, low food prices accompany a weak, struggling economy, says Jon Springer, retail editor at Supermarket News. “What happened over this last year has really taken people a little bit by surprise,” he says, calling the period “unusual.” Todd, too, called it “unique.”
Economists blame a confluence of factors. Energy and transportation costs fell, allowing food producers to operate more cheaply. But there was also a glut of food on the market. China started buying less food from the United States and so did other countries, partly because American goods got more expensive as the dollar got stronger. Some experts also say Americans themselves contributed through changing tastes. For instance, more people have been cutting back on beef. It all translated into a shift of supply and demand. People were not buying as much beef, dairy, and eggs as farmers and ranchers were producing.
Grocery prices “will gradually go up,” said Springer. “One of the big questions is how fast retailers will enact their own price increases because they’ve got to keep an eye on one another because nobody wants to look like they are more expensive than the other guy.”
The price war among grocery stores have been intense. The leading sellers, Walmart and Kroger, have been fighting Target and other competitors for the lowest price around. Even the typically upscale Whole Foods recently lowered prices after its acquisition by Amazon closed. German chains Aldi and Lidl, which are adding stores in the United States are adding extra pressure with deep discounts.
