It’s getting painfully expensive to eat.
We realize that’s not a news flash, but it’s what’s on Americans’ minds. No wonder. Among the necessities of life, food — sustenance — is close to the top.
President Donald Trump took office promising “on day one” to reduce grocery prices that were a significant factor in voters’ unhappiness with the administration of President Joe Biden. Not surprisingly, economic principles such as supply and demand and market competition (not to mention a bird flu that has wreaked havoc on egg supplies) so far have proven stronger than any immediate force Trump has been able to exert to make good on that unrealistic pledge.
In some visible ways, the situation has gotten worse in these early days of Trump 2.0. Newspapers nationwide reported last week that Waffle House, the restaurant chain ubiquitous in the Southeast, had imposed a 50-cent surcharge on all eggs used in its meals. Many other diner-style restaurants around the country have done the same.
The causes of stubbornly high food costs are varied, though, many of which have little or nothing to do with politics. We traveled last month to the Specialty Food Association trade show in Las Vegas to talk to some local business folk on the front lines and got an earful.
Xcell International in southwest suburban Lemont sells containers of sprinkles, spices and other kitchen stuff. It’s a serious business that requires millions of glass jars, acres of cardboard for boxes and labor to get its products on the shelves of retailers like Walmart and neighborhood grocery stores.
Wherever he looks, it seems, Xcell President Robert Day sees upward pressure on prices. “We fight so hard to keep our prices down,” said Day, holding a jar of orange sugar crystals. “I try to be a positive person, but are we headed for the biggest inflation ever?”
Some of Xcell’s woes are due to conflicts far from our shores. Ukraine, for example, is the world’s leading grower of sunflowers. Before the war with Russia, many of those seeds were pressed into oil in Russian factories and then processed into an ingredient used for Xcell candy sprinkles. When Russia’s attack on Ukraine disrupted the market for sunflower oil, that led to upward price pressure on a sweet little product few would have thought vulnerable to geopolitics.
Similarly, chocolate prices have soared because of problems thousands of miles away in West Africa. Cocoa beans grow in a narrow region around the equator that has suffered from drought and crop disease as the climate has warmed, cutting deeply into production.
Lamenting “these inflationary times,” Illinois-based Arway Confections & Long Grove Confectionery Co. this fall announced higher wholesale prices, blaming not only cocoa but also “the continued inflation on other raw materials, overheads and labor.”
Trump’s saber-rattling on trade is exacerbating these challenges.
Consumers braced in recent weeks for sharply higher prices on avocados and cherry tomatoes, among other items, when Trump announced 25% tariffs on Mexico and Canada.
He paused the tariffs for 30 days after the two nations made concessions on border security that may or may not have been meaningful concessions. But the threat of tariffs on two close allies that happen also to be our biggest trading partners persists.
Markets reacted poorly when Trump announced those tariffs and then recovered quickly when he relented. But jittery Wall Street traders aren’t the only people paying attention. Consumer sentiment measured by University of Michigan researchers fell this month to its lowest level since July, with consumers expecting sharply higher inflation over the coming year.
Food industry folks in Las Vegas were just as nervous. Agron Kosova of Fine Italian Food in west suburban Bolingbrook told us the potential for tariffs targeting the products he imports leaves him with a helpless feeling. “If you have a tax on Italy and Spain but not Turkey, it’s not fair. It’s not right,” he said. “But until it’s done, and you know the numbers, it’s guessing.”
Some in the industry bear their share of the responsibility as well, at least for the past run-up in inflation that caused so much public angst. While many companies big and small say they have tried to hold down prices, some evidence suggests that gouging has occurred. Profit margins for food and beverage retailers shot up in recent years, outpacing costs, while some manufacturers reduced the size of products while charging the same or higher prices, a phenomenon known as “shrinkflation.”
The bottom line is that food prices have soared about 30% over the past five years, and the situation seems to be worsening. The ripple effects extend beyond household budgets to the beleaguered restaurant and hospitality industries.
