Economic reports continue to show that inflation is coming down from the painful peaks of recent years. But the high prices many Americans still face at the grocery store remain a top concern for voters.
While government officials tout data that shows annual inflation is down to 2.4% from a 40-year high of 7% in June 2022, Americans who remember what they paid for everyday goods just three years ago aren't feeling much relief.
During his State of the Union speech on Thursday, Biden proclaimed that "wages keep going up and inflation keeps coming down."
"Inflation has dropped from 9% to 3% – the lowest in the world. And trending lower," he said.
Grocery prices surged more than 21% since the start of 2021, and while prices for some items have come down from their peak, there's little expectation prices will fall to where they used to be.
"The prices of some things will decline. Others will go up. But we don't expect to see a decline in the overall price level. That doesn't tend to happen in economies, except in very negative circumstances," Federal Reserve Chair Jerome Powell said during an interview with "60 Minutes" that aired in February. "If you think about the basic necessities, things like bread and milk and eggs and meats of various kinds, if you look back, prices are substantially higher than they were before the pandemic."
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When Americans complain about inflation, grocery bills are top of mind. More than two-thirds of voters say that inflation has hit them the hardest through higher food prices, according to a survey published by Yahoo Finance/Ipsos in November 2023. That is more than 50 percentage points higher than any other category, including gasoline, transportation costs and housing expenses.
Price data from the U.S. Bureau of Labor Statistics shows why shoppers are right to be concerned. An examination of just two common grocery list items, eggs and milk, reveals a stark increase in prices from January 2021 to January 2024.
In January 2021, the average U.S. price for a dozen grade A eggs in U.S. cities was $1.47. Four years later, that price jumped 52.6% to an average price of $2.52 per dozen.
In between those years, the retail price for a dozen eggs peaked at a walloping $4.82 in January 2023.
"I think consumers have probably noticed a little bit of a roller-coaster ride on egg prices over the last year, and that's due to a number of factors," said Emily Metz, president and CEO of the American Egg Board, a checkoff organization that promotes "The Incredible, Edible Egg."
In addition to ongoing supply chain issues from the pandemic, Metz explained that an outbreak of avian flu dealt a devastating blow to poultry producers and severely curtailed egg supply in 2022 and 2023.
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"We just had fewer chickens producing eggs. And so, you know, supply and demand. We struggle with that a little bit. Our farmers dealt with that as well as they could," Metz told FOX Business.
She said egg producers are price-takers and that the retail price consumers see at the grocery store is largely dependent on market forces of supply and demand.
"As I'm sure a lot of folks know, a lot of other things besides food are just more expensive right now. And so, packaging the feed that our chickens eat, labor to work on our farms and care for our chickens, all of that is more expensive," Metz said. "Those costs can have an impact on the final cost of eggs."
Looking forward, Metz said there's reason to hope costs can come down as the supply chain normalizes after COVID-related disruptions. But even at an average of $2.50 per dozen, she observed, eggs are easily the most affordable protein available on the market — and one of the most nutritious too.
"If you do that math of what two eggs for a meal would be, you're under 40 cents," Metz said.
Compare that to the price of sirloin steak, which went for $9.15 per lb. in January 2021 and now costs an average of $11.64 per lb.
Milk is another staple household commodity. Three years ago, in January 2021, the average cost for whole milk was $3.47 per gallon in U.S. cities.
As of January 2024, the price has climbed 13.2% to $3.96 per gallon.
"Dairy was a little bit late in experiencing retail price inflation compared to other items," said Peter Vitaliano, chief economist for the National Milk Producers Federation.
Vitaliano pointed out that since the average cost of a gallon of milk peaked at $4.22 in November 2022, it has steadily declined while the overall prices of all food and beverages has continued to increase.
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He explained that the retail price consumers pay is made up of two parts: the cost of raw milk in that gallon and the farm-to-retail cost. While the cost of raw milk has remained fairly consistent through the years, except for a brief period in 2022 when it was very high, the farm-to-retail portion has stayed high, driving up the cost of milk.
"Supermarkets are very reluctant to change their prices when their costs go up, but when they go up a certain amount they have to raise them. And when they do that, they have a tendency to hang on to those higher prices, even if the cost of their food comes down," Vitaliano said.
"But milk is a pretty competitive business. They can't hold it up forever. So there's a combination of retailers trying to hold on to some of that higher price, but probably more importantly, the farm-to-retail part of milk in this case has gone up because of general inflation."
Costs that are pushing up the price of milk include labor, transportation, energy, packaging and the cost of feed.
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"The dynamics of what's happened to feed prices have had a big impact on the price farmers pay, and that price feeds into what the fluid milk processors pay," Vitaliano said.
In January 2017, the price of feed to produce a gallon of milk on the farm averaged just under a dollar and the margin farmers received to produce a gallon of milk over that cost was about $1.25. A federal program exists that will pay farmers when the margin of the milk price over the price of feed falls below $1.10 per gallon, a baseline that can indicate the financial health of dairy producers.
By August 2021, the price of feed increased to nearly $1.50, and the margin fell to only $0.57, placing farmers under severe financial distress. Vitaliano said that milk production declined that year, but demand remained consistent, pushing milk prices to record highs.
Feed prices have since come down, but farmers are currently earning only about $1 per gallon of milk, which is still below the $1.10 baseline, he added.
For commodities like milk, the price at the store is closely related to the cost of producing it. Where prices go in the future will continue to depend on overall inflation and the price of feed, which Vitaliano predicted will continue to drop as farms become larger and more efficient.
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Biden blamed corporations for raising "their prices to pad their profits charging you more and more for less and less."
"That's why we're cracking down on corporations that engage in price gouging or deceptive pricing from food to health care to housing," he said.
FOX Business' Megan Henney and Bradford Betz contributed to this report.
