Grocery Prices Increased the Most in a Decade in 2020. Here's How 2021 Looks

The COVID-19 pandemic meant people ate more meals at home, and perhaps if you were cooking more yourself, you were saving money by not eating out. But in a frustrating twist, a recent government report suggests that all of our home-cooked meals actually helped drive up grocery store prices in 2020.

According to USDA data released last week, the Consumer Price Index for grocery store or supermarket food purchases last year was up 3.5 percent: That's not only a significant jump from 2019, where these retail "food-at-home" prices were up only 0.9 percent from the year before, but also well above the 20 year annual average of 2.0 percent and the highest annual increase since 2011.

Certainly, the pandemic's massive effect on supply chains and labor drove much of the increase, but the USDA's Economic Research Service (ERS) says the change in consumer habits aided the price jump as well. "Stay-at-home mandates in 2020 increased demand for several food products in retail stores, rather than at restaurants and schools," ERS staff wrote. "Supply chains struggled to adapt to this transition, which put upward pressure on retail prices."

Meanwhile, the cost of restaurant purchases saw a similar spike, up 3.4 percent over the past year, meaning Americans were likely paying more for food wherever they went. "Only the price of fresh fruits declined in 2020 (by 0.8 percent), while all other food categories increased in price," stated a summary of the ERS's Food Price Outlook for 2021. "Prices for meat categories, poultry, fish and seafood, and dairy products increased between 4.4 percent (dairy products and other meats) and 9.6 percent (beef and veal)." The meatpacking industry was especially hard hit by coronavirus outbreaks, while fruit prices dropped as American producers struggled to ship their produce abroad and had to sell them domestically.

Conversely, the ERS added that "retail food prices started to decline for many categories in July," and the USDA believes that 2021 should be significantly better, with grocery prices potentially slipping back below the 20-year average. That said, the USDA's current estimate that food-at-home prices will increase between 1 and 2 percent would still be the largest annual increase since either 2014 or 2015.