What Factors Impact Food Prices? – Part 1

Food Symbol Sign X

There has been a lot of talk on the news lately about how this news story or that news story will definitely result in the price of some food skyrocketing.  The furor over bacon being impossible to get is a good example.  For a week or so, every talking head on television warned us that the drought meant fewer pigs which would lead to widespread bacon shortages.  This led to people buying more bacon than they normally would, which in turn made it seem like there was a sudden bacon shortage.  It was the hype that helped it come true.  While all this was happening, there were experts being interviewed in the background reassuring us that there wasn’t going to be a bacon shortage and that the cost of bacon was not going to shoot up suddenly.  Unfortunately, reassurance that a national calamity, like a bacon shortage, is not imminent, doesn’t garner any attention in today’s 24-hour news cycle.

This means that it is more important than ever for consumers to understand the real factors that affect our food prices.  With this understanding, you will be able to make smart decisions about how to stretch your food dollar while still filling your family’s plates.  Here are two of the most common factors that affect the price of food and how each factor can impact the price you pay.


The first factor impacting the price we pay at the grocery store is the costs associated with producing the food on the farm.  As farm technology has advanced, our dedicated farmers have been able to increasingly produce more food per acre. But, growing things, including livestock, takes time, feed, water, space, and hard work, all of which come with costs.  As the cost for those things go up (often, the biggest cost and hardest one to control are energy costs, such as diesel for tractors), the price of producing food must go up too or the farms and ranches that provide our food security would be forced to go out of business.  All that being said, while production and the costs associated with it are a factor, they are a much smaller piece of the puzzle than you might think.  According to the USDA’s Economic Research Service, farmers receive around 14% of what we pay for the food they produce.  So even if the cost to produce the food doubled, that should only result in an increase of about 14% assuming all other factors remained the same.


Last year everyone was talking about how food prices were going to be impacted by the drought.  The predictions were not good and people braced themselves for prices to go up and up.  There is truth to this statement but it is not always as clear cut as the newscasters make it sound.  Unusual or extreme weather of any kind can wreak havoc on crops.  When the damage impacts large parts of the country, like last year’s drought, it can significantly decrease the crop yield for that year.  Because the law of supply and demand plays a part in how much we pay for food, the fewer crops there are available, the more we will have to pay for the food those crops produce.  Peanut butter is a great example of how this works.  In 2011, the U.S. peanut crop was devastated by inhospitable weather conditions and the yield was much smaller than normal.  This caused a dramatic increase in the cost of peanut butter with most major manufacturer’s increasing prices by 30% overnight.

Production and weather are the two factors we hear about most often when the price of food comes up in discussion, but they are only two of the factors that impact what we pay for the food we eat.  Check back next week for part 2 of this series for details about the other, less often discussed factors that affect how far we can stretch our family food dollar.

Share This:
This entry was posted in Arizona Food Prices, Focus on Agriculture, Food Production, Tips to Stretch Your Food Dollar and tagged , , , , , , , , , , , . Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *