Wholesale food prices are on the rise

Food prices are rising sharply even before they reach supermarket shelves.

Why it matters: Americans are already paying more for groceries. New inflation data this week suggests that the pressure is not letting up.

• Wholesale fresh and dry vegetable prices surged 27% last month, adding to a 31% price jump the previous month.
• These are the prices paid by food distributors, grocery chains and other businesses to farmers and other producers for eventual sale to consumers.
• Wholesale food prices overall are up 1.7% from a year earlier, ending a three-month streak of annual price declines.

Zoom in: Unusually warm weather, crop disease and insect infestations have reduced lettuce and other leafy green harvests in California.

• The Iran war, meanwhile, has driven up the cost of fertilizer and fuel, making it more expensive to grow and transport food.
• A regional grocery chain recently told Federal Reserve officials that it now costs more to transport a head of lettuce from California than to buy the lettuce itself, citing high diesel fuel prices.
• Truck freight costs are up almost 25% over the past year, the largest annual increase since 2022 and on par with the surge seen during the pandemic-era inflation shock.

The big picture: It's unclear how much of the surge in producer prices will be passed along to consumers. But steeper price increases were already showing up at supermarket checkout counters last month.

• Grocery prices rose 0.4%, the biggest monthly increase in 6 months, driven by higher prices for meat, dairy products and snack foods.
• Fresh vegetable prices climbed 2%, including a nearly 8% jump in lettuce prices.