Washington is targeting the wrong culprit in its response to rising grocery prices, according to a new study from the Pacific Research Institute released Aug. 3.
While the Federal Trade Commission has launched an investigation into fertilizer manufacturers, the study by PRI Senior Fellow in Business and Economics Wayne Winegarden argues that today’s food inflation is being driven by global supply disruptions and government policies such as tariffs that increase the cost of producing and transporting food, rather than widespread anticompetitive conduct.
The report, “Taming the Grocery Bill: Policy Reforms to Make Food More Affordable and Prices Less Volatile,” comes as the USDA projects food prices will rise another 3.4 percent this year.
“Families don’t want political finger pointing; they want to know why they’re paying more at the grocery store and what can actually be done about it,” Winegarden said. “The evidence shows that today’s higher food prices are the predictable result of supply disruptions, tariffs and other costly laws and regulations. If policymakers truly want to lower grocery bills, they need to make it easier, not harder, to produce and move the food Americans depend on.”
Key findings
The study identifies several forces it says are behind current food inflation:
- The conflict involving Iran disrupted global oil and fertilizer markets, sharply increasing farming and transportation costs throughout the food supply chain;
- China’s fertilizer export restrictions have tightened worldwide supplies; and
- Longstanding U.S. permitting delays and other regulations have made the nation’s agricultural supply chain less resilient to global shocks.
Recommended reforms
Instead of expanding federal investigations, the report recommends:
- Eliminating tariffs on food products and preserving tariff relief for fertilizers and other agricultural inputs;
- Reforming the federal permitting process to expand domestic production;
- Pursuing freer trade to reduce supply chain disruptions; and
- Repealing regulations, including the Jones Act, that the report says unnecessarily increase transportation costs.
“The affordability crisis isn’t just about inflation,” Winegarden said. “It’s about whether our policies make America’s food system more resilient, or more vulnerable, the next time the world experiences a major disruption.”
The report concludes that reducing regulatory barriers and improving market flexibility would help lower grocery prices while strengthening the U.S. food supply against future geopolitical shocks. The Pacific Research Institute is a California-based free-market think tank.
Related: FMI: Global Conflict, Rising Energy Costs Put Upward Pressure On Food Prices