Policy Backgrounders

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Geopolitics Hub

Policy Backgrounders

CED’s Policy Backgrounders provide timely insights on prominent business and economic policy issues facing the nation.

Food Prices and Inflation

August 11, 2023

Food price inflation has been exacerbated by extreme weather events, Russia’s departure from the Black Sea Grain Initiative on July 17, and its subsequent attacks on grain infrastructure at Ukrainian ports and Ukrainian retaliation.

The current food price crisis resulted, in part, from the impact of the COVID-19 pandemic and its effects on supply chains and the impact of financial firms seeking an alternative to equity investments by investing in commodities.
Further, in 2017, China began stockpiling grains; currently, China, Russia, and India hold more than half of the global supply of grains. The war in Ukraine greatly restricted the supply of grains and soybeans around the world, and Russia’s recent decision to pull out of the Black Sea Grain Initiative will likely exacerbate the impact of the war on food price inflation.
Certain aspects of climate change (such as shifting growing patterns) will be manageable, but the real challenge from climate change will be changes in pests and pathogens in growing areas, heightening the critical need for US scientific research in this space.
Drivers of the current US food price inflation are largely interrelated. Ports still face significant bottlenecks caused by labor shortages and regulatory issues.
Costs for grocers have risen in every category. Much of the pressure on grocery stores comes from manufacturers, and manufacturers are not lowering prices even as overall inflation has eased.

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