Debate Over Food Inflation: What's the Real Story?

Mish

Is food a bargain or are prices rising far faster than the BLS says they are?

The above image is from the Visual Capitalist via ZeroHedge a Decade of Grocery Prices for 30 Common Items.

Is the chart accurate? I have no reason to believe otherwise.

In fact, it supports my contention that food is a bargain.

Annualized Rate of Inflation

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16 of 30 Items Annualized Inflation Under 2%

16 of the 30 items listed by the Visual Capitalist have prices rising less than 2% per year.

Foods that Store Easily

Next consider flour, rice, sugar, pasta, and dried beans.

All of those items store very well for long periods of time in a pantry. No refrigeration is necessary.

Moreover, all of those items go on sale periodically. There is no reason to buy any of those items when not on sale.

And how much flour and sugar does one use anyway? Few bake bread any more, and those who do can always buy on sale.

Pasta is frequently 2 for 1.

There are 5 items in this category.

Meat

I have discussed this before and it's worth repeating. Get a freezer!

I was at Sam's Club a week ago. Whole pork tenderloin was on sale at $1.98 a pound. It is still on sale today at that price.

Compare that price to the Visual Capitalist listed price of $3.82.

All of the prices listed by the Visual Capitalist are likely accurate, but as of a moment in time.

Anyone paying those prices has no idea how to shop.

Paying $4.12 per pound for ground beef or $3.21 for boneless chicken is absurd.

Frozen turkeys go on sale every Thanksgiving for $0.69 or so. That's the same freaking price nearly every year for 10 years. Buy 2 or 3. Have one for thanksgiving and another for Christmas and Easter.

Bacon, on sale, is often 2 for 1.

There are 7 items in the meat basket. One of them, pork, also falls in the under 2% inflation category.

Peanut Butter

Peanut butter does not store forever, but it does store well, especially unopened, and is frequently on sale.

Food Inflation Complaints

  • Grapes at 2.48% inflation.
  • Potatoes at 3.31% inflation.
  • Cookies at 2.54% inflation.

Those are items that do not store well and may not go on sale frequently enough to take advantage.

Summation

  • 16 out of 30 items in the basket have inflation under 2%
  • 5 items out of 30 have frequent sales and store well at room temperature for long periods of time.
  • Peanut butter stores long enough at room temperatures to last from sale to sale.
  • 7 meat items, one of them also in the low-inflation category, are a bargain for anyone smart enough to get a freezer.

Sales prices, I have pointed out before, are quite stable, even if non-sale prices aren't.

People look at the lead-in chart and think "Oh my God, flour is up 44%". They have no idea how to annualize price increases and they also forget about all the times things are on sale.

Ironically, the Visual Capitalist makes a compelling case that matches my point of view: food is a bargain. All you need to do is learn how to shop.

Discussion Items

Diving Into the CPI: What’s in Your Basket?

Food: What's In Your Basket? How Fast Are Prices Rising?

It's important to note that I do not agree with the Fed's inflation policies.

I am merely stating that the reported amount of food inflation is total nonsense for anyone who knows how to shop.

Moreover, If we got rid of tariffs, sugar subsidies, etc., many prices in that food basket would be declining.

I support free trade and believe prices should be lower, but let's not overstate how much food prices are rising.

Mike "Mish" Shedlock

Comments (43)
No. 1-43
El_Tedo
El_Tedo

I disagree with Mish's interpretation of these numbers. A 40% increase in food prices over 16 years is staggering, particularly in a deflationary period with stagnating wages. In an era of globalization, technological advances, and cheap labor from open-borders, food prices should be falling, not rising. The biggest mistake (IMO) people make when underestimating price inflation is using 0% as their baseline to measure price inflation against. Even 0% price inflation is evidence of inflation, as steady price decreases would be the norm over time, if we had sound money.

Mike Mish Shedlock
Mike Mish Shedlock

Editor

Don't put words in my mouth. I am not saying I agree with inflation policies. I am saying the reported 40% rise in the price of food is total bullshit for anyone who has any idea how to shop.

Mike Mish Shedlock
Mike Mish Shedlock

Editor

Appended to my article: It's important to note that I do not agree with the Fed's inflation policies.
I am merely stating that the reported amount of food inflation is total nonsense for anyone who knows how to shop.
Moreover, If we got rid of tariffs, sugar subsidies, etc., many prices in that food basket would be declining.
I support free trade and believe prices should be lower, but let's not overstate how much food prices are rising.

El_Tedo
El_Tedo

(I never implied that you advocated inflationary policies.) The fact that someone can AVOID some price increase by devoting extra resources towards food shopping, does not mean the price increases don't exist. If I choose to walk to work once a week after a 25% increase in the price of gas, that doesn't mean the price hasn't gone up simply because I personally am spending the same amount.

Mike Mish Shedlock
Mike Mish Shedlock

Editor

Food prices fluctuate on seasonality and crop failures, etc.. To expect constant prices even in the absence of Fed inflation policies is nuts. Thus one needs to learn how to shop no matter what the Fed is doing. The only extra resource needed is thinking. Then again, thinking, for some people might be a chore.

El_Tedo
El_Tedo

You're comparing apples to orange, no pun intended, by bringing 'smart shopping' into the equation, post 2000. If the 2000 numbers were based on conscientious shopping, they would be lower and skew the percentages in the other directions.

El_Tedo
El_Tedo

With regards to 'thinking' and my shopping ability. I am without question a terrible shopper, particular when it come to food. I get my groceries delivered, I used Grubhub & UberEats and frequent restaurants and diners regularly. I'm more than capable of living of $2 a day of beans and rice, but have more valuable things to do with my time. On the other hand, like Senator Paul, I mow my own lawn, even though I can afford to have someone do it for me, simply because I enjoy it. I believe those kinds of choices would qualify as thinking.

MishMash
MishMash

These numbers aren't based on 'smart shopping' either. I belongs in the discussion because it is indeed a fact that you can find very good deals if you shop; and there is more competition for food dollars. If you have someone food shopping for you, should you really be involved in a debate about food prices? That's like a priest discussing the state of the porn industry. Wait.. that might have been a bad example. lol

0123
0123

I'm guessing none of you live in Manhattan where the illustrated prices would be considered bargains. We routinely pay double or more for the same items and those prices have risen sharply and noticeably in the past few years. Import prices, especially considering the dollar strength (at least up until 2017) were never reflected in retail prices for, say, European wines and cheeses. Someone was gouging and continues to gouge.

MishMash
MishMash

Someone is forcing you to live there?

MishMash
MishMash

I recently moved to cow country. These prices are high compared to what I pay. Food is dirt cheap here. So, it all balances out w/ idiots who live in the city and complain about the high prices of food. Look around Manhattan, I'm guessing you won't see many cows.. not counting the feminists.

0123
0123

Thankfully, no. But my ability to pay isn't the question. The general population here is exposed to the same high prices driving disposable income even lower than "average" Americans and without decent wage increases on any horizon, it's gonna be even harder for most people.

El_Tedo
El_Tedo

That fact that someone COULD move out of Manhattan when prices goes up doesn't mean prices haven't gone up!

El_Tedo
El_Tedo

This 'smart shopping' is a red herring (again, no pun intended). Of course you can save money devoting extra time to shopping. And, if it costs more money today to 'have someone food shopping for you' (whatever that means) than it did 16 years ago, how is that not inflation?

0123
0123

Smart shopping in Manhattan would mean going to Queens or, worse, New Jersey.

SweetKenny
SweetKenny

Hey Mish, the only fault I see is the statement about smart shopping. Inflation calculations should compare the past to the present based on similar situations. Changing into a smart shopper then adds another element into the equation which isn’t measurable with any accuracy.

Mike Mish Shedlock
Mike Mish Shedlock

Editor

SweetKenny - Correct - One needs to have historical prices in their head. I do. But my focus is entirely on meat prices. Pasta at $0.68 a box or whatever is not worth remembering. One pound of pasta goes a hell of a long way for $0.68 or $1.28. It makes a huge difference whether pork is $4.00 or $2.00 especially feeding a family of 4. I never pay more than $1.99 for boneless skinless chicken breasts and sometimes a lot less. The price in the infographic was $3.21 vs $3.43 ten years ago. What was the sale price 10 years ago? I cannot state precisely and it varies month-to-month. Not on sale, I recently saw $4.29 for chicken and said to myself "that's absurd". My point here is that not-on-sale prices vary far more percentage-wise over time than sales prices. The sale-to-sale basket annual increase may be close to 1% or so. And as one person stated, "my basket looks nothing like that". How many people even use flour? I suspect One 5-pound bag probably lasts a year for the vast majority of the population. Does it matter at all what the price increase was? The answer is it will be reflected in the price of bread.

Flip312
Flip312

I shop in downtown Chicago and food prices seem quite reasonable. High end restaurant prices are another thing. $50 and $60 steaks are now common.

Carl_R
Carl_R

The Manhattan versus cow country argument is meaningless. Prices were high in Manhattan twenty years ago, too, and cheap in cow country twenty years ago, too. The whole point of this post is lost on me, anyway. If food prices are indeed up 40% in ten years, that's 3.4% a year, a bit faster than inflation. That's to be expected as there are components of the CPI that have fallen, such as electronics, so everything else should be up slightly more than average. As another food comparison, by the way, I remember Campbell's Tomato Soup priced at $.28 in 1976, and saw it for $.98 today. Based on the CPI, it should be at $1.24, so it's a relative bargain. Some items go up faster than inflation, others less fast. That's why the CPI looks at a wide variety of items.

Carl_R
Carl_R

If you look deeper into the CPI, you'll actually find that a component of the CPI that has been rising faster than food is food away from home, and as minimum wages rise, that will continue to rise faster than food at home. Furthermore, people are eating out more all the time. Due to substitution, which moves the CPI from items people use less of to items which they use more of, food at home continues to be a smaller and smaller factor in the CPI, while food away from home becomes a greater component. Not all substitutions decrease the CPI; this one increases it.

Carl_R
Carl_R

Food at home was up .8% in the recent year, while food away from home was up 2.4%. As Mish commented, not many people bake their own bread anymore (Actually, I do, sometimes.)

Carl_R
Carl_R

Even more a reason to question the point of this post, if you look at the actual CPI data, it matches exactly to the data posted above. So, if you want to look at the raw data on any number of items that go into the CPI, you can look here:

jivefive99
jivefive99

What comes to me immediately is that food is one of the products in the US economy that cannot really be messed with by governments, companies, banks, or anyone else. Capitalistic market forces are left to do their good work, and as a result, supply is abundant, and prices are kept low over time by good, old-fashioned, non-juiced competition. Take that higher education and health care!

MishMash
MishMash

I agree that meat is an important thing to look at. Sam's meat is questionable to me. I think they irradiate their meat or something. W/O even them, there's competition out there. We have the Amish locally and I recently met a guy from Nashville who's doing quite well selling buffalo meat. Despite the efforts to consolidate farming there's still many options. All in all, as a percentage of income, food for consumption at home remains a relatively small percentage budgets. Houses, as another example, also have gone down (slightly) in price when measured to the price of gold or other commodities.

Mike Mish Shedlock
Mike Mish Shedlock

Editor

Beef is one notable exception to stable sales prices. For at least a decade Prime rib and T-Bones on sale were precisely $4.99. On occasion, you could get whole beef tenderloin for $4.99! at A few years back, I do not recall precisely when, Beef prices jumped and never went back to where they were. I have not seen $4.99 T-Bones now for years. The sales price rose all the way to $7.99 or possibly even $8.99. It's now back to $6.99. That's a significant increase in sales price. The non-sale price is worse. Looking at cattle futures, what I described happened in 2012 or so. Prices peaked in 2015. That supports my shopping experience that says prices have slowly started to drop in the past couple years but but we are not back to 2010 or even close.

AlexSpencer
AlexSpencer

To further complicate things I believe that the foods are not the same as they were 10 years ago. Sale chicken today is often watered as indicated by the package "contains a flavoring solution " .. We get migranes unless we buy the "natural chicken" at 3X the price. Wheat is often sprayed with weed killer before harvest. Imported foods can be sprayed with banned insecticides . Imported honey is unlikely to be pure honey but rather honey flavored rice syrup. Even peanut butter has been produced in without proper inspection of the production facilities. The food quality has dropped in concert with the cheap prices. Truly an apples to oranges comparing problem

hmk
hmk

Mish

hmk
hmk

Mish, you have stated before that you felt food prices were stable. I was somewhat skeptical but now its true in black and white. I do feel somewhat better about this component of the CPI now. However I believe most other components do not capture the true cost of living and it is deliberately understated by the govt.

ReadyKilowatt
ReadyKilowatt

So if food prices are up, maybe it's time to eat less? Or switch to cheaper alternatives like a plant-based diet? I know that when I decided to change my diet for health and vanity reasons I ended up with a much fatter wallet.

Carl_R
Carl_R

"Capitalistic market forces are left to do their good work, and as a result, supply is abundant, and prices are kept low over time by good, old-fashioned, non-juiced competition." This is not true at all. There are lots of government farm assistance programs. The goal of farm assistance programs is to encourage over-production, which in turn keeps prices low, and assures a surplus. Few things would hurt the careers of politicians more than a food shortage.
"To further complicate things I believe that the foods are not the same as they were 10 years ago." This is an excellent point, though I'm not sure that ten years ago is the proper starting point. If you compare the price of "organic" food today versus "standard food" from fifty years ago (which was orgranic by today's definition), inflation would look a lot higher.
"However I believe most other components do not capture the true cost of living and it is deliberately understated by the govt." If you believe that the CPI is too low by a significant amount, you must also believe that the standard of living of Seniors has fallen precipitously over the last twenty years. If the CPI is 2% too low, the standard of living of Seniors today much be down by a third in the last 20 years. If it is 3% too low, it is down 46% in 20 years. How much do you believe that their standard of living has fallen over 20 years?

Mike Mish Shedlock
Mike Mish Shedlock

Editor

Thanks, HMK. Yes, it's pretty clear food price inflation is exaggerated. The BLS does play games though. They assume if beef is high, people will eat more chicken. If grapes are high, more bananas. I do not do that, but I do propose food prices are relatively stable, and sale prices are quite stable. As for hormones and the like, federal regulations prohibit the use of added hormones or steroids in chicken or turkey. I think Beef is a different matter, but is today any different than 10 years ago?
Here is the beef debate: https://en.wikipedia.org/wiki/Beef_hormone_controversy

xil
xil

@MishTalk, regarding hormones/steroids. This is anecdotal but, growing up, it was unusual to see females nearly as tall or taller than me (i'm middle-aged and 6 feet). That's clearly changed in the past decade or two. I contend there's "something in the water".

KidHorn
KidHorn

It really depends on what you eat. Many healthy foods are very expensive. A serving of berries costs $3. A serving of carrots or potatoes costs 25 cents.

FlyOver_Country
FlyOver_Country

A couple of observations. Food prices are very dependent on location, so I never compare the prices of apples in Manhattan to apples in my home town of Columbus. I do, though look at the ratio of food costs to wages. I believe that gives a better sense of how food costs are felt by individuals.
Second, beef prices have sored over the past few years because of the severe drought in the Southwest. Cattle ranchers had to send whole herds to the slaughterhouses because of the lack of grazing land in 2014/15. Obviously, the supply of beef has since crashed and prices have soared. It takes a few years to raise a new head of beef, so prices have stayed high. Now after a few years after the drought, beef prices are stable and even started to come back down with the new supply of beef.
Thirdly, the CPI on eating out. My thought is that the mix of restaurants have changes dramatically over the years. It appears to me that people are willing/wanting to spend a bit more to eat out. The mix of eat out restaurants that fit the middle ground between fast-food and upscale dinning has grown dramatically over the past 15 to 20 years. Thus the average person is spending more per meal.

Stuki
Stuki

They really need to include fish in that comparison. Fresh and wild caught.

Claiming the fact that it is possible to get some item cheaper than what this, presumably (or at least one could hope) like for like, comparison indicates; by “shopping smart;” makes no more sense than claiming drug prices aren’t really rising, since one could always get them cheaper in the Philippines.

nic9075
nic9075

Millenials dont shop for groceries and don't cook. They pay $15.95 for a grilled chicken sandwich or $9.00 for a Chipolte Burrito bowl.

nic9075
nic9075

Food at home was up .8% in the recent year, while food away from home was up 2.4%. As Mish commented, not many people bake their own bread anymore (Actually, I do, sometimes.)

LOL . Food 'away from home' up only 2.4%?? LOL.. More like up 10% across the board. The thing is that people (especially millenials) are willing to pay these higher prices that restaurants (from low end fast food to high end dining are charging) so the higher minimum wages & $15 per hour isn't causing job losses that some feared. Actually it is the opposite, new restaurants are opening everywhere now it seems

Mike Mish Shedlock
Mike Mish Shedlock

Editor

My post got wiped out - Hoping to recover

Mike Mish Shedlock
Mike Mish Shedlock

Editor

Food away from home: We eat out a lot and at the same restaurants. Prices have not changed where we frequent. But prices at fast food places seem to have gone through the roof. It's insane what it costs for 2 people at Wendy's. On the road, we now often go to grocery stores and build our own sandwiches or salads getting far better food and value than fast food places.


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