Rising Food Costs: Understanding the Impact on American Consumers

Food could get more expensive for one big reason.

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Key points

• Russia and Ukraine are major global suppliers of wheat.
• The current conflict overseas could result in shortages -- and higher prices.

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For months, Americans have been grappling with record levels of inflation. These days, everything from gas to apparel to groceries is costing more money. And a lot of people are being forced to raid their savings accounts just to cover their basic expenses.

Unfortunately, though, tensions overseas could end up exacerbating an already large problem. At this point, Americans may need to gear up for the fact that food costs could spike even more.

Wheat prices could soar

Both Russia and Ukraine are major suppliers of wheat, accounting for roughly 14% of global production, according to agricultural data analytics firm Gro Intelligence. The two countries supply about 29% of all wheat exports on a global level.

Meanwhile, the current conflict could end up putting a lot more pressure on what's become a weakened supply chain. If that happens, and wheat production and exports stall, it could drive up the price of the key commodity, causing even more financial pain at the supermarket.

Wheat is a major ingredient in grocery staples like breads and cereals. Over the past year, the cost of cereal and baked goods has risen 6.8%, according to the U.S. Labor Department. But the ongoing conflict overseas has the potential to drive that number upward.

How to gear up for higher food costs

These days, many households are doing their best to manage higher living costs. But in light of a potential uptick in wheat prices, consumers should consider additional changes to free up more money for grocery purchases. Those could include cutting back in spending categories that aren't essential, or picking up side jobs to serve as an income boost.

The good news is that if wheat prices experience an increase, it shouldn't happen overnight. Commodity prices are usually set and locked in well in advance, so if wheat prices rise in the near term, it won't impact the cost of consumer goods for weeks or even months after the fact. But if the Russia-Ukraine conflict continues to escalate, it could have a notable effect on grocery prices this spring.

In 2021, global food prices rose as much as 28%, reports the Food and Agriculture Organization of the United Nations. That's largely attributable to the supply chain bottlenecks that took hold last year. The current situation overseas is only adding to an already large problem.

Now to be clear, the U.S. isn't particularly reliant on wheat imports from Russia and Ukraine. But as the demand for locally sourced wheat increases, domestic producers could easily jack up their prices, thereby creating a world of pain for consumers who are already struggling to keep up with their bills.

Of course, consumers could always retaliate by cutting back on wheat-based products that come at a higher cost. But eliminating those products is not an easy thing to do. For now, Americans may need to resign themselves to the fact that their grocery bills could climb even more than they already have.