Food prices are rising again. What is behind the increase

Rochester, Minnesota
CNN
—

The Sunday before Thanksgiving, a grocer was here without eggs.

An hour and a half north in Richfield you could get some eggs, but they weren’t cheap. That dozen cost $1.70 more — a good 40% higher — than it did just four months ago.

In November, egg prices rose 8.2% nationwide, registering one of the highest monthly increases in the past two decades, according to consumer price index data released last week. And it’s not just eggs – shoppers have seen jumps in beef, coffee and non-alcoholic beverages, driving overall grocery prices to their biggest monthly gain since January 2023.

And more gains appear to be on the way for the pulp-paper-wrapped protein: Wholesale prices for chicken eggs rose nearly 55% last month, and wholesale food prices rose 3.1% (their highest monthly increase in two years).

Economists say not to panic. The “egg inflation” and sudden price increases in some major food categories are reflections of isolated events rather than anything systemic and signs of an acceleration of inflation.

That doesn’t make it any easier, however, for Americans worn down by years of prices rising much faster than they typically do.

But while seemingly aberrant, these price increases add another layer of cost to products that have become significantly more expensive since before the pandemic.

“Overall grocery price inflation is relatively tame; it’s basically in line with where it was before the pandemic … nothing alarming,” said Gregory Daco, EY Parthenon’s chief economist. “But prices relative to where they were before the pandemic , remain very high.”

A once-in-a-generation bout of high inflation — though caused by a confluence of factors arising from the pandemic, the war in Ukraine and other events — weighed heavily on Americans and ultimately drove former President Donald Trump back to The White House.

Even before “inflation” became a household word, food prices have long been subject to fluctuations due to weather events, crop yields, disease, war, supply chain snarls, increases in demand, or other temporary disturbances.

And that’s what’s happening here with eggs (and beef and coffee and orange juice).

“Inflation is what it is, but we’re seeing more dramatic increases in the pockets of the food aisle, not necessarily across the board,” said Billy Roberts, senior food and beverage analyst at CoBank, a cooperative bank that serves agricultural businesses.

Eggs (+37.5% annually): An outbreak of bird flu is ravaging flocks across the country, reducing supplies at a time when Americans are in a festive mood and baking, cooking and eating out more.

USDA in December further downgraded US egg supply estimates and raised price forecasts for 2025.

Beef (+5% annually): U.S. cattle stocks are at their lowest level in more than 70 years, according to the American Farm Bureau Federation. Driven by drought and other rising costs, the decline is expected to continue through 2025 as dry conditions persist.

Expansion of U.S. meat buying is not expected to start until 2026 or 2027, according to a CoBank report released last week.

Orange juice (frozen juices +17.2% annually; fresh juices 3.1% annually): Frozen non-carbonated juices tell the sharpest story for a beverage category that was hit by hurricanes, bad weather and a citrus disease. And the future may look even bleaker for orange juice like Brazil – which delivers about 30% of America’s imported OJ — had its worst harvest in decades due to flooding, drought and citrus greening diseases.

“I think these increases (in orange juice prices) won’t necessarily be temporary,” CoBank’s Roberts said. “I think there will be some supply issues underlying these price increases.”

Coffee (+1.9% annually): The same weather events hampering Brazil’s citrus production negatively affected the second most consumed beverage in the United States. Arabica coffee beans, which make up the majority of global coffee bean production, sold for a record $3.44 per pound last week.

The future prospects are unfortunately unclear for lovers of the morning cup o’ Joe.

“Climate change is getting worse. Just imagine more severe weather, rising temperatures and the direct effect on the people working in the coffee plantations, Michael Hoffmann, professor emeritus at Cornell University’s College of Agriculture and Life Sciences, told CNN earlier this year. “Probably for (consumers) the coffee will just get more expensive.”

Chocolate (wholesale chocolate production from cocoa +108.7% annually): Over the past three years, a series of adverse weather events have hit the cocoa-producing regions of West Africa, which are responsible for over 70% of the global cocoa supply. Candy makers have responded by shrinking the size of products, changing recipes and leaning more heavily into non-chocolate offerings.

“Cocoa costs, which may remain high into 2026, are stress-testing the confectionery industry on multiple levels,” Bank of America economists wrote in a note last week.

Although parts of the food industry are experiencing cost increases due to specific reasons, those price increases just hit differently these days—especially when they’re simultaneous.

Through November, grocery prices rose 1.6% from a year earlier, according to the latest CPI report. The annual rate is trending below headline inflation (which accelerated to 2.7% last month) and landed at an average seen during 2008-2019, data from the Bureau of Labor Statistics show.

The annual increase in grocery prices is the highest since this time last year; however, it is a far cry from 2022, when it averaged 11.4% and peaked at 13.5% – well above overall inflation’s peak of 9.1%.

The breakneck pace resulted in grocery prices being 27% higher now than they were in February 2020, before the start of the pandemic in the US. And some categories fared far worse than others during that time: Eggs are up 81% in the past four years, margarine is up 55%, beef and veal are up 37%; and juice has increased 32%.

“That’s the hard part — you’re unlikely to see food prices drop significantly and return to 2019 levels,” Daco said. “The best you can generally hope for is a stabilization of prices.”

Trump said last week that he hoped to bring down grocery prices by drilling for more oil domestically, which in turn could bring down gas prices and transportation costs.

Economists and food industry experts say it’s not that easy. Food manufacturers have expanded their footprint across the country to cut miles, and much of the increase in transportation costs has been due to a shortage of drivers.

Separately, economists and businesses have sounded the alarm, saying other promises by President-elect Trump — specifically 25% tariffs on Mexico and Canada, as well as mass deportations — could drive food prices higher and accelerate overall inflation.

It is almost impossible to avoid rising food prices, so both consumers and businesses have been forced to adapt.

“I think we’re going to continue to see consumers looking to stretch the food dollar as much as they can, not only because of the cost of food, but also because it seems like the cost of everything is going up,” said Roberts.

Vidlak’s Brookside Cafe in Omaha, Nebraska, has been serving breakfast and lunch for 28 years, but is being pressured by rising costs of critical ingredients. Founder Roger Vidlak said he does everything he can to not pass those costs on to customers.

“Recently, the eggs have been ridiculous,” Vidlak said over the cacophony of noise during a busy Friday. “Six months ago you could get a case of them for $18 to $20. For a 15 dozen cases now they’re up to $75.”

But he found some solutions. In addition to keeping track of the weekly price checks, Vidlak turned to cage-free eggs, which have been less affected by bird flu and are significantly cheaper — as are liquid egg mixes.

“I haven’t raised my prices in, oh, probably six months,” he said. “I’m just kind of absorbing it.”

Every time prices go up, his business takes a hit, but he doesn’t want it to negatively affect the people on the other side of the steak and egg plates.

“I’m a family-owned restaurant, so I just take it a little bit because I have hundreds of repeat customers, some of them here every day,” he said. “You don’t want to hollow them out.”

He added: “Of course you want to make money, but you don’t have to make it all in one day.”