Kamala Harris and Grocery Prices
To the editor:
This is part 1 on Kamala Harris’s promises to reduce grocery prices. Part 2 will address Donald Trump’s promise to increase tariffs even further (next week).
How might Harris address grocery prices? First, one must realize that the net profit margin at grocery retailers is 2% or less on average. Kroger stores, a national grocery chain, had a net profit margin of 1.4% in 2023, up significantly from the year before. Thus, if there’s only 1.4 cents on every dollar that could be wrung out of the retailer, making policy changes at that level will have almost no impact on food prices. Another way of saying this is that antitrust policies aimed at creating more competition (bringing a Brookshire Brothers store to La Grange to compete with HEB, for example) would have almost no effect on what we pay for groceries.
Second, one can examine transportation costs, which on average take up about 7 to 10% of every dollar the consumer spends on food. Most of that involves ocean shipping and land trucking, not railroads (when was the last time you saw a trainload of cantaloups moving through town?). Ocean shipping is generally considered a highly competitive international industry, and it would be almost impossible for a President Harris or Trump acting alone to have much influence on prices charged there. In terms of the U.S. trucking industry, it is also highly competitive, deregulated decades ago by President Jimmy Carter, so prices are about as low as they can reasonably be expected to be, given fuel costs.
Third, we must look at food processing, an area where costs vary from one grocery product to the next. For example, a tube of biscuit dough, ready to bake, has far more processing cost built into it than a bag of fresh spinach. In either case, there are many players, and their share of the final price of the item produced can range from 15 to 75% of what the consumer pays. Here again, fuel costs influence profitability of producers involved, but their primary challenge is wages and the availability and productivity of their workers. Those factors are extremely hard to influence quickly.
Finally, we look at the farmers and ranchers, who must be satisfied with the remaining share of our food dollars. Their receipts amount to about 15 cents per food dollar, on average, and that is what they receive for their crop, NOT their net income. They, too, have significant labor, energy, and other input costs (fertilizer, pest control, insurance, interest on bank loans, etc.). Thus, about five cents of that is all they get for the hard work of producing crops or animals for the food chain.
Where would you suggest a President Harris or a President Trump apply pressure to increase production or cut costs, so food prices would be driven down? The big challenge is that farming technology is at a very high level of sophistication already, so that the law of diminishing returns to agricultural research is not as likely to yield huge gains in output now, compared to 50 or 100 years ago. In addition, farmers face the growing challenges of water availability, sufficient farm labor availability, and climate change. When one examines total world food production for the past ten years, our output appears to have grown very little, even though world population continues to grow, even if at slower and slower rates.
There are no easy answers here, folks. Sure, we might have a terrific research breakthrough that has us all eating healthy sources of inexpensive nutrients by 2040, but nothing like that seems to be on the immediate horizon, and we want relief from high food prices NOW, of course.
We often hear people say, “What goes up must come down,” but that might not be true of overall food prices, in the short term at least, and maybe not even in the long term. Only time will tell, but in the meantime, I am going to give all I can to AMEN and to international food relief organizations, so that those who live at the low end of the income scale can have access to food resources beyond just the retail chain.
A vote for Harris or Trump being unlikely to fix this, I’m determined to do what I can to put food on the tables of hungry kids and adults through the non-profit sector. Please join me, dear readers. (Next time: on Trump’s new tariff proposal.)
Annette Citzler La Grange