Farm prices for fresh and dry vegetables surged 38.9% in July compared to July 2024, the U.S. Bureau of Labor Statistics revealed in its Producer Price Indexes release last week. But while that price spike, reported in mainstream media, might have caused consumer concern about prices at the grocery store, the reality of how — if at all — it will impact retail pricing is more nuanced.
“The PPI in question is officially titled ‘Fresh and Dry Vegetables.’ The July increase was 38.9%,” says Joseph Kowal, economist, Producer Price Index at the U.S. Bureau of Labor Statistics. “This index tracks the average changes in farm prices for fresh and dry vegetables, irrespective of buyer type. The main drivers of this increase were higher prices for lettuce (+133%), Spinach (+157.4%), and Broccoli (+41.3%). Poor weather conditions in selected major growing areas contributed to the rise in prices.”
The 38.9% increase in prices for fresh and dry vegetables was the largest increase since a 42.4% advance in March 2022, says Kowal, adding PPIs are generally constructed from samples of producers, however for the agricultural sector, most prices used by PPI are collected from secondary sources.
What does July’s price spike in wholesale fresh vegetables mean for retailers and their shoppers?
“In my marketing areas, we have seen some cost increase for sure, but not to [that] extent,” says Jeff Cady, vice president of produce and floral for Northeast Shared Services, referring to the 38.9% increase.
The Schenectady, N.Y.-based Northeast Shared Services banners include Tops Friendly Markets, Price Chopper and Market 32.
“It has helped that New York grows a bunch of commodity veg type items,” he says. “With that said, costs are up, and that is impacting the bottom line. We will most certainly be raising retails where it makes sense. Some items can tolerate a retail increase while others are super sensitive.
“We just have to be careful to not go too high and negatively impact volume and increase shrink,” he adds. “It is a balancing act for sure.”
Making Cents of Higher Veg Prices
The global market researchers at Circana who analyze retail sales say while food and beverage prices at retail have risen significantly in recent years, vegetables have remained one of the more affordable items in grocery.
“Vegetables, especially, have not seen as much price increase in absolute dollars and cents as other things that are bought ubiquitously in the store,” says Jonna Parker, vice president of Circana Fresh Foods Group. “On average, we are seeing about 34% higher prices in food and beverage at retail than in 2021. That is real.
“In comparison, vegetables only have gone up about 18 cents [per pound],” she continues. “So, in the grand scheme of things, where eggs, salty snacks, carbonated beverages, cooking oils have been up because of a variety of factors, we have to remember that when the price of something in vegetables goes up, we’re talking about cents — not the dollars that we’ve seen in beef and eggs.”
Driving Consumption
Parker says as competition for wallet share at grocery retail has never been fiercer, with shoppers buying more often but from a broader array of stores, it’s in the industry’s best interest to remain price competitive.
But what worries Parker is that a hyper-focus on price will further erode the country’s already declining vegetable consumption.
“Vegetable consumption per capita, based on our consumption tracking data, number of eating occasions, per house, per person in America has continued to decline since 2021,” she says. “Basically, when COVID ended and people were out more, doing things more, our vegetable servings went down at the same time fruit went up.
“Price is just one of the reasons that people buy or don’t buy,” she continues. “But we also need to remember that we need to market vegetables on more than price. And if wholesale costs or retail costs go up, how are we making sure the demand stays?”
A focus on demand is the thrust of Circana’s latest research, which Parker says gets to the heart of what’s motivating consumers to eat fresh produce.
“The study we just released found that price hasn’t historically been a barrier to fresh veg consumption,” she says. “It’s actually been more of consumers [questioning] how vegetables fit with what they’re making and eating that’s been a barrier.”
