Amazon is about to toss a smart bomb at food prices.
The tech giant said that it will slash prices on Monday when it completes its acquisition of Whole Foods. The announcement sent shares of Kroger, Walmart, Costoco and others into a tailspin as pricing pressure is expected to eat into their margins.
One unintended consequence of Amazon’s announcement: the complete devastation of the unfounded fear-mongering about food prices under the Trump administration that has been rampant in the press.
“You could soon pay more for worse food. Thanks, Donald Trump,” blared a Washington Post headline on December 6.
“A Donald Trump presidency could lead to food shortage in the U.S.,” an article on Quartz declared.
“Your wine and food prices are going to rise when Donald Trump takes office,” a piece on MarketWatch warned.
The Wall Street Journal‘s Justin Lahart was characteristically more sober and more thoughtful in his assessment. No screaming about food shortages or declarations that food prices were definitely headed up. But even Lahart’s March 15 column warned of a “food pinch.”
“The higher prices that could ensue would raise costs for food companies, grocery stores and restaurants, putting margins at risk,” Lahart wrote.
A full list of Food Price Panic articles would go on for scores of entries.
Even before the Amazon announcement, these predictions were in the process of being proven wrong. The cost of food in the United States in July of 2017 was just 1.1 percent higher than it was a year earlier, well below the long-term annual average of 3.4 percent. The price of food purchased for home consumption from grocery stores was up just 0.3 percent compared with a year earlier.
Overall, the U.S. government expects supermarket food prices to change between -0.25 percent and 0.75 percent for the entire year, according to the Department of Agriculture’s latest update. Next year they are expected to rise between 1 percent and 2 percent.
The best thing that can be said about the Food Price Panic articles is that perhaps they were early. Perhaps one of these days Trump’s immigration stance is going to send food prices sky-rocketing. Could happen. Not likely. But you never know.
The authors also could not have predicted that general inflation would remain very low. Or that Amazon would buy Whole Foods and immediately announce price cuts. Except that this is not really a credible defense. It just shows that those making panicky predictions about the direction of food prices really had no idea what was going to happen.
And some food market watchers did not fall into the trap. Back in April, Breitbart News reported that food prices were not rising and should not be expected to rise.
“Food is in a deflationary cycle, with prices falling year after year and expected to keep falling. Even if immigration policies are causing a labor shortage, American families are not seeing the effects at the grocery store,” Breitbart News reported.