Can Legislative Bodies Effectively Tackle Rising Food Prices?

“There are deeply entrenched markets throughout the food supply chain, from the fertilizer industry to the animal feed production and retail grocery sectors, dominated mostly by a few large players,” said Rakeen Mabud, chief economist at Groundwork Collaborative. “This lack of competition suggests that these companies are not compelled to reduce prices at every point in the system.”

Policymakers can address this issue by preventing consolidation and promoting competition. For example, the Federal Trade Commission (FTC) is attempting to block a $25 billion merger between grocery giants Kroger and Albertsons. The merger would allow Kroger to acquire its main competitor, and the FTC argued that this merger would be anti-competitive and would impose costs on consumers, as stated in a hearing earlier this year in Oregon.

During the proceedings, it became evident that food pricing is not solely driven by inflation. An email sent in March by Kroger’s senior pricing director, Andy Groff, to other company executives suggested that the grocery chain was raising prices on milk and eggs to levels higher than necessary under inflationary conditions. In response to questions from FTC lawyers about the email, Groff acknowledged that Kroger was “trying to pass inflation on to consumers” and could raise prices in areas with little competition without seeing a drop in sales.

During the Trump administration, consolidated companies generally benefited. The Trump administration dismantled the USDA agency responsible for regulating competition in the livestock, poultry, meat, grain, and oilseed industries.

The Biden administration has made some efforts to limit consolidation. For instance, in 2022, President Joe Biden signed an executive order aimed at fostering more competitive practices, particularly in the meat and poultry Supply Chains. Harris’s plans to address “price gouging” are also consistent with these efforts.

The issue is deeply embedded in the U.S. food system and continues to have real effects. In cities or regions with only a few large food distributors, consolidation can sharply increase consumer costs. According to USDA data, for example, in several important Midwestern cities with significantly low competition in the milk distribution supply chain, consumers have been paying nearly $1 more per liter of milk.

In Kansas City, for example, there is virtually no competition among milk producers. Hiland Dairy, a joint venture of two large dairy cooperatives, dominates the region. Over the last two years, Kansas City has experienced the highest milk prices among 30 major cities. In Chicago, despite having two large milk distributors dominating the local market, milk prices increased in 2023.