Perspectives on high U.S. retail food prices during 2020–2022

Abstract

The recent food price inflation has sparked lively debates globally in media accounts, policy circles, and academics. A large body of literature has emerged across several fields of economics. However, each study typically focuses on a single or subset of causes, indicating that factors contributing to the recent food price inflation are broadly ranging and complex. This paper provides a comprehensive synthesis of what we learned about the major causes of high food prices in 2020–2022 in the United States and how they differ from those identified in prior food price hikes during the Great Recession of 2008. To provide context, we first discuss stylized facts about the U.S. food industry structure and previous empirical evidence on economy-wide drivers of high food prices. We then survey the literature on drivers of price surges observed since 2020. We document that the overall price surge, including food prices, in 2020–2022 has some unique factors primarily stemming from the consequences of the COVID-19 pandemic—specifically, U.S. fiscal support and money supply growth are the leading factors. Like in 2008, high commodity prices played a significant role in recent food price hikes—although their impacts might not be as large as in 2008. Inflation expectations due to high oil prices were a significant factor in 2008 but were not found to be an essential cause of the recent price hikes. Furthermore, the evidence on the role of factors directly related to retailers’ conduct, such as seller’s inflation or price gouging, is mixed. Considering our synthesis, we identify important gaps where future research is needed and policy priorities.