Food Costs Are Tumbling But Shoppers Still Face Soaring Bills

As a rout in the price of food commodities from wheat to cooking oil deepens, the cost of products on grocery shelves continues to rise.

Almost a year on from Russia’s invasion of Ukraine, which sent grains and other staples soaring to a record, a United Nations’ index of food-commodity costs fell for a 10th straight month in January. The longest falling streak in at least 33 years contrasts with the food inflation that’s worsening a cost-of-living crunch for consumers.

Food executives are warning of more price hikes to come, even as commodities like palm oil and dairy decline. Diplomats talk of the worst food crisis since World War II, with parts of Africa on the brink of famine.

This striking dissonance underscores the significant time lag for farmgate prices to feed through to those paid by households. Moreover, food commodities only make up a small proportion of the cost inputs for products such as breakfast cereals.

In the US, the farm level portion of food consumed at home is about quarter of the costs, and only about 5% when eating out, according to Joseph Glauber, former chief economist at the US Department of Agriculture.

Take bread. The cost of wheat accounts for as much as a 10th of the total cost of a loaf, Glauber said. The rest is driven by transporting the wheat, milling it, making and baking the bread, packaging it and stocking grocery stores, he said.

Higher energy prices are still feeding through to processing costs, workers are demanding higher wages and suppliers are pushing retailers for higher pay.