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The U.S., Israel, and Iran agreed to a two-week ceasefire on Tuesday, but the sticker shock you\u2019ve been feeling every time you go to the grocery store will get worse if the war continues. One of the first places you\u2019ll feel it will be the produce aisle, experts say.\u00a0<\/p>\n
A Fortune analysis of produce wholesale prices from USDA data found grocery-cart staples such as tomatoes, bananas, and yellow onions have experienced significant price spikes since the war began. The United Nations reported its global food price index rose by 2.4% in March, the second consecutive month of rising prices.<\/p>\n
\u201cThe big recent changes are the war causing spikes in diesel, fertilizer, and chemical prices,\u201d Jeffrey Dorfman, professor of agricultural and resource economics at North Carolina State University, told Fortune.\u00a0<\/p>\n
USDA predicted food prices will increase by 3.6% in 2026, but soaring fuel prices should lead to an only 1% to 2% increase on produce, Dorfman said.\u00a0<\/p>\n
How fuel prices affect grocery prices<\/p>\n
To understand how fuel prices are actually affecting your grocery bill, it\u2019s important to look at how much energy affects food prices. Fossil fuels used to make oil, diesel, and fertilizer used in farming and distribution account for between 15% and 30% of produce costs, Dorfman explained. If fuel prices increase by 30%, as they have since the war began, produce, which accounts for about a fifth of a shopping cart, will increase by just 1% to 2%, Dorfman estimated.\u00a0<\/p>\n
Shipping costs are also a key factor in price increases. This time of year, most produce in the U.S. comes from Florida, Arizona, California, and Mexico, Dorfman said. If you live farther from these places, and food has to travel longer, you will see more of an effect on prices, he noted.\u00a0<\/p>\n
Other factors impacting grocery prices<\/p>\n
Fuel prices are not the whole story.<\/p>\n
Grocery prices were facing upward pressure even before the war in Iran, Dorfman said. A growing labor shortage owing to limited immigration, drought, and overall inflation have all led to price increases, he said.\u00a0<\/p>\n
Labor, which contributes to about half of the cost of groceries, was the single biggest contributor to higher prices before the war, Chris Barrett, professor of applied economics and management at Cornell University, who studies international agriculture, told Fortune.\u00a0<\/p>\n
\u201cLabor shortages have been a very real feature of the food value chain over the last 14 months, and that means that they\u2019re having to pay more for overtime,\u201d he said. \u201cThey\u2019re having to pay more to get or to keep workers because they\u2019re losing workers as people have been detained or deported.\u201d\u00a0<\/p>\n
In October, the Department of Labor filed a report with the Federal Register, estimating that 42% of the U.S. crop workforce is unable to enter the country, faces potential deportation, or is leaving the U.S.<\/p>\n
Another key factor is electricity prices beyond fuel and diesel, Barrett said.\u00a0\u00a0<\/p>\n
\u201cEnergy is also embedded in your grocery bill,\u201d he said. \u201cJust think of all the refrigerated trucks you see moving fruits and vegetables and dairy products around. Think of all the refrigeration and freezers in the grocery store. Think of all the electricity running the machinery that does the processing and the packaging.<\/p>\n
\u201cAll of those higher electricity costs turn into an added expense on your grocery store bill, and that was already an issue before the war,\u201d he continued.<\/p>\n
Tariffs also raised produce prices before the war, Barrett said.\u00a0<\/p>\n
\u201cTariffs are a tax right on the top,\u201d he said. \u201cThe importer is paying a duty to the government to import tomatoes from Mexico, or to import broccoli from Chile, during our winter. That passes straight through to you and me at the grocery store checkout.\u201d<\/p>\n
What to expect over the next few months<\/p>\n
Grocery prices could get much higher if the war continues, Dorfman said.\u00a0<\/p>\n
\u201cIt\u2019s not like we can\u2019t ship the oil now, but we\u2019ll catch up once this is over. You can return to normal amounts of oil being shipped, but you can never really catch up,\u201d Dorfman said. \u201cI certainly can\u2019t predict how long the war is going to last, but the longer it lasts, the longer oil prices will stay high, and the slower they will be in returning to normal.\u201d\u00a0<\/p>\n
While the current effects of the war on grocery prices may be mild, customers could feel the pain for the rest of the year if the war continues another two or three months, Dorfman said. This is, in part, because most crops only grow once a year. Therefore, if farmers use higher-cost fertilizer to grow products like corn this spring and summer, it could affect prices until the next growing season.\u00a0<\/p>\n
If the war does not last much longer, food prices may not go up, Peter Zaleski, an economics professor at Villanova University, told Fortune. While crop prices tend to be volatile, other foods may not change in the short term.\u00a0<\/p>\n
\u201cEven especially at the retail level, firms are loath to raise prices,\u201d Zaleski said. \u201cThey\u2019re probably in a wait-and-see mode to see for certain,\u201d especially when it comes to factory-processed food. Other manufacturers may respond with shrinkflation, or offering a smaller amount of product for the same price, he said.\u00a0<\/p>\n
#Iran #war #exacerbating #high #grocery #bills<\/p>\n","protected":false},"excerpt":{"rendered":"
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