Why are grocery prices rising? Here's what shoppers need to know

The price of groceries increased by 2.6% between March and April.

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/ Source: TODAY
By Michelle Gant

When the current global health crisis forced tens of thousands restaurants across the country to close, Americans began stocking up on groceries in unprecedented numbers. Soaring demand, along with a host of other factors related to the coronavirus pandemic, have caused massive disruptions across the food supply chain resulting in prices going up across the board.

“Food prices are rising not because we don’t have enough food, but mainly due to the fact that the agri-food supply chain is currently unable to deliver when and where food is needed due to the shortage of labor, particularly at farm level," Sanjib Bhuyan, an associate professor at Rutgers University's Department of Agriculture, Food and Resource Economics, told TODAY.

Steve Reed, an economist with the Consumer Price Index at the Bureau of Labor Statistics, told TODAY the current situation has “created unusual price movements” and has also made data collection more challenging for his team.

“In terms of price movements, we’ve seen large declines in things like gasoline, apparel and motor vehicle insurance. On the other hand, we saw unusually large increases in food prices in April,” he said via email.

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In April, the price of groceries rose 2.6%, according to the Bureau of Labor Statistics, resulting in the biggest one-month increase in grocery prices since 1974.

This statistic stands in stark contrast to other areas of the economy, where prices have fallen overall.

“Food price gains were robust as we know there are empty shelves out there,” Peter Boockvar, chief investment officer at Bleakley Advisory Group, told TODAY. “Demand we know in most areas of the economy has collapsed and prices are falling in response.”

Reed added, “Corresponding to the unusual economic conditions, in April we had an unusual amount of both record declines and increases in our monthly data.”

Here's what consumers can expect to find during their next trip to the grocery store.

Dairy costs are on the rise

Milk, cheese, ice cream and other dairy products saw an average 1.5% price jump from March to April.

The dairy industry has faced numerous challenges amid the continuing pandemic. Last month, many dairy farmers were forced to dump out millions of gallons milk when large buyers, like restaurants and schools, were forced to close. Though demand has surged at food banks, the U.S. supply chain system is not set up to rapidly adapt to sudden changes.

Meat, poultry and egg prices have increased

The overall cost of most types of meat, poultry, fish and eggs has increased by 4.3%, the largest increase of any single grocery category. Various cuts of beef saw a 3.7% increase, while pork prices went up by 3% and poultry prices rose 4.7%.

In some areas of the country, the increases were larger — the price of ground beef in the Dallas-Fort Worth area of Texas increased by 14.5%, the price of chicken breast in Los Angeles skyrocketed by more than 26% and the price of orange juice is up 14.6%, according to Nielsen data exclusively obtained by NBC News.

Most alarming, perhaps, has been the increase in egg prices, which shot up a whopping 16.1% on average. In Boston, the cost of eggs increased by 24.2%, according to Nielsen data.

A class-action lawsuit filed in California at the end of April accused several companies, including farms and suppliers, of engaging in “the despicable and illegal practice of price-gouging of essential groceries, specifically eggs, in the midst of the ongoing and unprecedented pandemic.”

In response to the increased cost of meat, Tyson Foods, which processes a fifth of the nation’s beef, announced in mid-May it would be cutting prices on some of its beef products at supermarkets and restaurants by up to 30%.

Pantry staples got more expensive

With more time being spent at home, more people have turned to baking. The cost of flour and prepared baking mixes shot up 1.3%, while sugar and sugar substitute prices increased by 1.9%.

Bakery products and cereals increased in price by 2.9%. The cost of rice shot up by 3.6%, while pasta increased by 2.5%.

Some snacks and sweets got cheaper

If you’ve got a sweet tooth, you might be in luck. Some bakery items, like fresh cakes and cupcakes, saw a 2.3% decrease in price from March to April. And while the cost of America's most popular fruits, like bananas, apples and oranges, increased, the price of "other fresh fruits" and tomatoes decreased by 1.9%.

Fruits and vegetables aren’t much more expensive

Overall, fruits and vegetables haven’t increased significantly, with prices increasing by an average of 1.2%. However, you’ll want to be picky about which produce items you’re adding to your cart, as favorites like apples and citrus fruits went up by 4.9% and 4.3%, respectively.

Longer-lasting vegetables saw the biggest price increases, as well. Potatoes, which can last up to three weeks, increased by 2% in price. The cost of canned veggies also increased by 3.6%.

Will any foods get cheaper?

Unfortunately, few foods saw any significant price decreases. Data showed prices for ham, butter and tomatoes drop, but Reed noted that those items are “certainly the exceptions.”

Bhuyan said that we can expect food prices will not go down in the short run.

“Fortunately, I believe that this food price rise is temporary. It should mostly disappear as soon as the virus-induced restrictions are lifted allowing the agri-food supply chain to resume its normal functions within a short time afterwards,” he said.

Trey Malone, an assistant professor at Michigan State University's Department of Agricultural, Food and Resource Economics, agreed, noting that the rapid swings in food prices are representative of the massive shifts consumers are experiencing in all sectors of the economy.

He added that because of the food supply chain structure, shoppers might be able to find some items that were traditionally sold to restaurants for cheaper than normal, like fresh cakes, bakery items and certain cuts of meat.

In a TODAY segment that aired Wednesday, NBC business correspondent Jo Ling Kent suggested that some brands and stores may offer discounts. Brand names like Campbell's, Dannon, Beyond Meat, and Pepsi are reportedly planning to offer "value pack" deals, and generic brands may offer discounts.

Kent also said that lower-cost grocery stores like Dollar General and Aldi will try to win over customers from chains like Kroger, Stop and Shop and Whole Foods.

What foods are likely to increase in price?

Reed told TODAY that the Bureau of Labor Statistics does not speculate about what’s to come. “We simply measure price change, and leave it to others to study markets and form expectations about the future," he said.

Both Bhuyan and Malone, however, shared some predictions based on historical pattens.

“One of the largest cost factors in any food is the labor cost because the agri-food sector is very labor intensive — you need labor at every stage, from farming to retailing," Bhuyan said. "So any food that requires a specialized or large labor force to harvest or handle or process, like vegetables, or requires major transportation logistic support, is likely to see a gradual rise in price until the crisis is over."

Malone suggested consumers may see a similar increase in prices across the board next month.

"So long as trade restrictions do not become problematic, I would anticipate that we will see the next CPI prices to represent a similar increase to the recent price data," he said.

"One item to watch is garlic, since it is largely imported from China,” he said, further explaining that whether garlic prices rise or fall may be indicative of potential long-term price changes.

Is there anything shoppers can do to save money?

When it comes to getting the biggest bang for your buck, Bhuyan and Malone stressed the importance of simply being aware of current prices.

Bhuyan suggested using shopping apps where available to compare prices of items at multiple stores before setting out on your next shopping trip.

“Unless you live in a very rural area where you may have your own food supply of vegetables, dairy, and meat, or in urban areas considered food deserts, most consumers in the U.S. have access to more than one supermarket within a short driving distance, so they should shop around,” he said.

“For people in food desert areas, unfortunately they may have to pay a higher price because food retail outlets in such areas are typically small, carry limited items and have a higher cost of doing business, so I doubt they will absorb the rise in the cost of food,” he added.

Kent's segment also highlighted concerns from Americans who use food stamps to make ends meet. Angelica Curiel, a mother of six from Los Angeles, told Kent that her government assistance used to last the whole month, but now it only lasts her about ten days.

If you're having trouble finding certain items at your usual supermarket, shopping at alternative grocery stores may provide some relief. Malone said data suggests many people are buying most of their items at one store (like Costco), which means smaller retailers, like local grocers and corner markets in urban areas, might actually have a wider variety of items available relative to some of the larger retailers.

Bhuyan recommended visiting supermarkets that cater to international communities since they have well-established supply chains and are still working hard to meet demand.

Whatever you do, both experts advised minimizing trips to the grocery store during the pandemic and, if the price is right and time slots are available, consider ordering grocery delivery.

What else should consumers be aware of?

Now more than ever, Malone said it's important for people to avoid panic buying and hoarding, which may lead to more dramatic price increases or in-store purchase limits.

“We are two months into one of the most extreme exogenous shocks to our system and yet we can still find a nutritious meal — even if that meal doesn’t look entirely like it did this time last year,” he said.

He also noted that many people are struggling to afford staple food items during this time, so if you are able, “donate funds to supporting the safety nets that keep these families from going hungry.”

Bhuyan reiterated that this strain on our food system is temporary telling TODAY, "Our farmers and rest of the agri-food sector, which includes the food processing sector, the food wholesaling sector, and the food retailing sector, are very resilient, strong, and will bounce back as soon as most restrictions are lifted."