Concentration May Be Secret Ingredient in Food Price Hikes
Political Ad Taps into Consumer Anger
My husband winces every time this inane political TV ad appears!
You've seen it – 1st Congressional District Rep. Mariannette Miller-Meeks is pushing a grocery cart down the aisle, all the while blaming high grocery prices on liberal politics. "Biden-Harris' economic policies doubled the price of eggs," she clucks. Furthermore, she points out, prices of a loaf of bread and hamburger have risen by 27%!
My husband's not a hyper-political partisan. And Miller-Meeks doesn't represent our district. But the ad gets under his skin. "How dumb does she think we are?" my farmer-husband asks.
I agree. No U.S. President has much direct influence over increases in supermarket food prices.
Miller-Meeks isn't a native Iowan, but she's lived in this farm state for years. Surely she knows the fundamental factors influencing the price and quantity of goods and services, as well as what drives supply and demand in a marketing chain?
Take animal and plant diseases, for instance. She's surely aware that almost 101 million egg-laying chickens have been destroyed in the U.S. since January 22, due to the outbreak of highly pathogenic avian influenza. (Prior to Covid-19, eggs never had reached $3 per dozen; Bureau of Labor Statistics) Fewer eggs lead to higher prices, right? Is she counting on Iowans to be clueless?
Weather and climate change also factor into food prices. Surely Miller-Meeks is aware that the widespread drought in the West has forced cattle producers to sell off more cattle because of the lack of pasture. The result is the smallest U.S. cattle inventory in 73 years. At the same time, estimated costs of cattle production will rise 4%.
And don't forget about the global market, namely the impact of the Russia-Ukraine conflict. There's a good reason Ukraine is called Europe's breadbasket.
But what about inflation and higher wages? Inflation reached a 40-year high in 2022. The American Rescue Plan checks sent to Americans throughout the Pandemic may have unleashed too much money chasing too few goods. Today's prices of goods and services are declining, wage growth is leveling off, and inflation is cooling. However, grocery prices have risen at a faster pace than the overall inflation rate.
Miller-Meeks knows that food prices can't be blamed entirely on the current administration. She's capitalizing on consumer frustrations.
After all, back in June 2024, Miller-Meeks wrote on her Instagram: "Great meeting with Iowa Egg Producers in D.C. today! We discussed the egg industry in Iowa and the animal health initiatives egg producers are taking."
Is Price-Gouging the Secret Ingredient in Food Price Hikes?
Americans are angry with supermarkets. A September Gallup Poll revealed that only 33% have a positive view of the grocery industry. That's the lowest in over two decades of polling. In 2020, 63% of consumers had a positive view.
Overall, grocery prices are up less than 1% in August from last year. But many consumers still expect prices to return to pre-Pandemic levels. (Don't hold your breath!)
Miller-Meeks is banking on voters being unaware that the Biden-Harris administration is unhappy with supermarkets, too. In February, Biden went on the offensive, taking aim at "price-gouging," as well as "shrinkflation," a practice of down-sizing the contents of cereal boxes or potato chip bags, without dropping the price. Kamala Harris has made price gouging a major focus of her presidential campaign. The Federal Trade Commission (FTC) also has accused grocery chains of exaggerating the impact of shortages to hike their prices.
An FTC hearing in late August cited as evidence an email from a director of pricing to Kroger executives in March admitting its milk and egg prices were "significantly higher" than needed to take inflation into account. Earlier this year the White House Council of Economic Advisers reported that major grocery chains have been operating at the highest profit margins on groceries in two decades. Processed food (requiring more labor) claimed a larger share of the price hikes.
However Grocery Dive, an industry journal, has argued that profit margins were a slim 1.6% in 2023, the lowest since the pre-Pandemic era.
One sleight-of-hand strategy I've noticed while shopping may play a role. Stores have increased their percentage of private-label (store brand) products. These products are cheaper for shoppers, but they're also more profitable for retailers who can buy less from major brand companies. A survey by a data company called Circana revealed that shoppers spent 6% more on private-label products in 2023 than in 2019.
More than Meets the Eye
What else is behind higher grocery food prices? Perhaps Rep. Miller-Meeks should consider pointing her finger at another culprit: market concentration. The five largest egg companies control between 36% and 40% of all egg layers in the U.S. In early 2023, the earnings report of Cal-Maine Foods, the largest U.S. producer, revealed a 718% leap over the same quarter in 2022. That's not chicken-feed!
Concentration in grocery sales is one reason the FTC, joined by eight states and the District of Columbia, has challenged the $24.6 billion proposed merger of Kroger, the largest grocer based on revenue, with its smaller rival Albertsons. Together they would control about 13% of the U.S. grocery market. The lawsuit went to trial in Oregon federal court in late August.
It's likely no coincidence that in the midst of this increased scrutiny, Federal Election Commission data shows that political contributions from large food companies to Democrats have risen during this election cycle. Kroger's and Albertsons' political action committees are top donors, but Walmart's PAC is an even larger contributor. (Walmart controls 22% of the U.S. grocery market.)
Consolidated Industries Profit from Supply Shocks
So, where are egg prices headed? Much will hinge upon further outbreaks of avian influenza, as well as moisture conditions in Western cattle country.
But that's not the entire story. It's increasingly evident that the consolidation of our food companies and supermarkets provides them free license to take advantage of supply shocks in our marketing chain.
It's true, as Miller-Meeks clucks in her campaign ad, that egg prices have doubled. But when she concludes by saying, "We've got to get these prices down!" you can expect to hear me squawk loudly in response to her simplistic, knee-jerk approach.
A report earlier this year by Groundwork Collective, a Washington think-tank, provides a more nuanced blueprint for long-range policy solutions, including:
· Carefully scrutinizing anticompetitive mergers throughout the food supply chain;
· Finalizing regulations to promote competition in the meatpacking industry; and
· Reinstating and making food assistance expansions, like the Supplemental Nutrition Assistance Program (SNAP), permanent. (Price spikes hit lower income families harder.)
Rep. Miller-Meeks would be better off if she quit playing the political blame game and focused on forward-thinking solutions. She should quit treating Iowans like a bunch of dumb clucks.
👍too bad we’ve lost the truth in political advertising!
Nailed it again. The negative ads are aimed at people who don’t read enough to stay informed. Sadly, they work.