Debate Over Food Inflation: What's the Real Story?

Is food a bargain or are prices rising far faster than the BLS says they are?

The above image is from the Visual Capitalist via ZeroHedge a Decade of Grocery Prices for 30 Common Items.

Is the chart accurate? I have no reason to believe otherwise.

In fact, it supports my contention that food is a bargain.

Annualized Rate of Inflation

16 of 30 Items Annualized Inflation Under 2%

16 of the 30 items listed by the Visual Capitalist have prices rising less than 2% per year.

Foods that Store Easily

Next consider flour, rice, sugar, pasta, and dried beans.

All of those items store very well for long periods of time in a pantry. No refrigeration is necessary.

Moreover, all of those items go on sale periodically. There is no reason to buy any of those items when not on sale.

And how much flour and sugar does one use anyway? Few bake bread any more, and those who do can always buy on sale.

Pasta is frequently 2 for 1.

There are 5 items in this category.

Meat

I have discussed this before and it's worth repeating. Get a freezer!

I was at Sam's Club a week ago. Whole pork tenderloin was on sale at $1.98 a pound. It is still on sale today at that price.

Compare that price to the Visual Capitalist listed price of $3.82.

All of the prices listed by the Visual Capitalist are likely accurate, but as of a moment in time.

Anyone paying those prices has no idea how to shop.

Paying $4.12 per pound for ground beef or $3.21 for boneless chicken is absurd.

Frozen turkeys go on sale every Thanksgiving for $0.69 or so. That's the same freaking price nearly every year for 10 years. Buy 2 or 3. Have one for thanksgiving and another for Christmas and Easter.

Bacon, on sale, is often 2 for 1.

There are 7 items in the meat basket. One of them, pork, also falls in the under 2% inflation category.

Peanut Butter

Peanut butter does not store forever, but it does store well, especially unopened, and is frequently on sale.

Food Inflation Complaints

  • Grapes at 2.48% inflation.
  • Potatoes at 3.31% inflation.
  • Cookies at 2.54% inflation.

Those are items that do not store well and may not go on sale frequently enough to take advantage.

Summation

  • 16 out of 30 items in the basket have inflation under 2%
  • 5 items out of 30 have frequent sales and store well at room temperature for long periods of time.
  • Peanut butter stores long enough at room temperatures to last from sale to sale.
  • 7 meat items, one of them also in the low-inflation category, are a bargain for anyone smart enough to get a freezer.

Sales prices, I have pointed out before, are quite stable, even if non-sale prices aren't.

People look at the lead-in chart and think "Oh my God, flour is up 44%". They have no idea how to annualize price increases and they also forget about all the times things are on sale.

Ironically, the Visual Capitalist makes a compelling case that matches my point of view: food is a bargain. All you need to do is learn how to shop.

Discussion Items

It's important to note that I do not agree with the Fed's inflation policies.

I am merely stating that the reported amount of food inflation is total nonsense for anyone who knows how to shop.

Moreover, If we got rid of tariffs, sugar subsidies, etc., many prices in that food basket would be declining.

I support free trade and believe prices should be lower, but let's not overstate how much food prices are rising.

Mike "Mish" Shedlock

Comments (44)
No. 1-25
El_Tedo
El_Tedo

I disagree with Mish's interpretation of these numbers. A 40% increase in food prices over 16 years is staggering, particularly in a deflationary period with stagnating wages. In an era of globalization, technological advances, and cheap labor from open-borders, food prices should be falling, not rising. The biggest mistake (IMO) people make when underestimating price inflation is using 0% as their baseline to measure price inflation against. Even 0% price inflation is evidence of inflation, as steady price decreases would be the norm over time, if we had sound money.

Mike Mish Shedlock
Mike Mish Shedlock

Editor

Don't put words in my mouth. I am not saying I agree with inflation policies. I am saying the reported 40% rise in the price of food is total bullshit for anyone who has any idea how to shop.

Mike Mish Shedlock
Mike Mish Shedlock

Editor

Appended to my article: It's important to note that I do not agree with the Fed's inflation policies.
I am merely stating that the reported amount of food inflation is total nonsense for anyone who knows how to shop.
Moreover, If we got rid of tariffs, sugar subsidies, etc., many prices in that food basket would be declining.
I support free trade and believe prices should be lower, but let's not overstate how much food prices are rising.

El_Tedo
El_Tedo

(I never implied that you advocated inflationary policies.) The fact that someone can AVOID some price increase by devoting extra resources towards food shopping, does not mean the price increases don't exist. If I choose to walk to work once a week after a 25% increase in the price of gas, that doesn't mean the price hasn't gone up simply because I personally am spending the same amount.

Mike Mish Shedlock
Mike Mish Shedlock

Editor

Food prices fluctuate on seasonality and crop failures, etc.. To expect constant prices even in the absence of Fed inflation policies is nuts. Thus one needs to learn how to shop no matter what the Fed is doing. The only extra resource needed is thinking. Then again, thinking, for some people might be a chore.