Last week’s headlines confirmed what many shoppers already felt at the checkout line—grocery prices are climbing fast. The Bureau of Labor Statistics (BLS) reports on unemployment and inflation didn’t just highlight rising costs; they sparked widespread debate about what this means for the Federal Reserve’s upcoming decision on interest rates.
What does this mean for the economy? And, more importantly, what does it mean for your wallet?
Overall Inflation Continues to Rise, As Does Unemployment
The Consumer Price Index (CPI) showed that inflation rose 0.4% in August, bringing the annual inflation rate to 2.9%. Meanwhile, the Department of Labor’s (DOL) jobs report showed that weekly unemployment climbed to 263,000 for the week ended September 6. That is the largest single-week hike since October 23, 2021.
The combination of weak employment and rising inflation is a prime ingredient of stagflation. More of that in a coming article.
Highest Grocery Inflation Jump Since 2022
One segment of the CPI that most impacts our daily budgets is “food at home.” This category tracks the cost of groceries. Last month it rose 0.6%. That marks the largest monthly increase since August 2022.
Some of the staples that have experienced the greatest price hikes include Coffee, which has seen a 20.9% price spike over the last year. Beef steaks are up 16.6% over last year. Additionally, fruit and vegetable prices are 2.3% higher than last year.
There are a couple of bright spots in food prices. Cereals, bread, and ham prices dipped slightly last month, and eggs remained unchanged from July. However, egg prices are still 10.9% higher than they were last year.
Why Are Food Prices Climbing
There is not one simple reason for rising food prices. Rather, there is a combination of factors, such as:
- Food Import Deficit. The nation imported $213 billion in food last year, according to the U.S. Department of Agriculture (USDA). At the same time, America only exported $176 billion in agricultural products. Since 2019, America has experienced a widening food import-export deficit.
- Tariffs. President Donald Trump campaigned on lowering food prices, but he has released a deluge of tariffs that are beginning to impact the prices of many goods. Food and agriculture have been among the first to reflect the resulting price increases.
- “In May and June, the effective tariff on food products jumped to an average of 7% compared with 2% in the same months last year,” reports the U.S. Chamber of Commerce. “These higher tariff rates translated into a massive $1.9 billion food tax – and that is just what was collected in two months.”
- Rising Retailer Costs. In earning calls this Spring, grocery retailers from Walmart, Kroger, Albertson’s, Costco, and more have warned that their costs are rising and being passed on to shoppers.
- Immigration Crackdown. An estimated 2.1 million immigrants work in U.S. agriculture, planting, growing, harvesting, and processing food, according to the Immigration Policy Institute. Between 2019 and 2023, they accounted for 21% of all workers in the food production industry. The Trump administration’s aggressive approach to immigration has reduced that workforce significantly.
Fewer workers to raise and harvest the crops means fewer crops. A reduction in food sources results in higher prices.
Hard Times For Farmers
A new study from the University of Arkansas profiles the financial pressure farmers are facing in combating inflation, labor shortages, lower commodity prices, and tariffs. As a result, bankruptcies are rising sharply.
“We’ve had 259 filings in the United States between April 1 of 2024 and March 31 of this year,” said Ryan Loy, extension economist for the University of Arkansas System Division of Agriculture, adding that the number of filings in the first quarter of 2025 outpaced those of the same period in 2024.
“We’ve already beat last year in terms of Q1 national filings,” he said. “Once you see this on a national level, it’s a clear sign that financial pressures that we saw before in the 2018 and ‘19 are kind of re-emerging.”
A Chapter 12 bankruptcy filing gives the farmer a chance to develop a repayment plan to satisfy debts. A Chapter 7 bankruptcy, on the other hand, provides for the liquidation of assets to pay debts.
Success Leads to Failure
Farmers may be some of the most efficient and productive business people in America. However, the weird economics of agriculture can work against a productive operation.
The more a farmer produces, the lower the prices of their crops go. It’s the law of supply and demand. So, the bumper crop production of the last couple of years has driven commodity prices down. And, this year looks like it will amplify the success/problem.
“Average corn yield is forecast at a record high 188.8 bushels per acre, up 9.5 bushels from last year,” according to the USDA’s National Agriculture Statistics Service (NASS). “NASS also forecasts record high yields in Idaho, Illinois, Indiana, Iowa, Minnesota, Missouri, South Carolina, South Dakota, Tennessee, Virginia, and Wisconsin. As of Aug. 3, 73% of this year’s corn crop was reported in good or excellent condition, 6 percentage points above the same time last year.”
Soybeans are on a similar upward production path.
“Soybean yields are expected to average a record high 53.6 bushels per acre, up 2.9 bushels from 2024,” reports the USDA. “If realized, the forecasted yields in Arkansas, Delaware, Georgia, Illinois, Indiana, Iowa, Michigan, Minnesota, Mississippi, Missouri, North Carolina, and Virginia will be record highs.”
The result is that the better farmers do, producing record crops, the lower the return on their work.
Farm Operating Costs Rising
While farmers are producing more and earning less, their costs are going up.
Many farmers are putting off upgrading aging equipment to hold costs down, but other day-to-day expenses keep rising. Among the most volatile of those costs is fertilizer.
There are several types of fertilizer used in farming. Of those, Phosphate fertilizers are leading the pack in rising prices. Gulf diammonium phosphate (DAP) prices rose from about $583 per ton in January to nearly $800 in August. That is a 36% increase in eight months.
In addition, nitrogen fertilizer prices are volatile. Potash prices are also increasing, with prices up 21% over the past year, according to a Texas Farm Bureau report out Monday (September 15). Tariffs and concerns over the effects of tariffs on Canadian imports. Our northern neighbor accounts for as much as 90% of the potash imported into the U.S.
What is more, other operating expenses, such as labor costs, electricity, property taxes, and interest payments, continue to rise.
“Really, what we’re seeing in this market, though, is volatility,” says Faith Parbum, American Farm Bureau economist, “and we think that will continue to persist as natural gas prices and shifting trade policies and other countries really are disrupting the markets and creating a lot of uncertainty.”
Crops and Food Supply
Most of the pain in U.S. agriculture is being felt by crop farmers, according to the Federal Reserve Surveys of Agricultural Credit Conditions. At the same time, livestock producers are less affected.
“Farm income and credit conditions deteriorated steadily throughout the Midwest and plains states in the second quarter of 2025,” the Kansas City Fed reports, “as profit opportunities in the crop sector remained weak.”
Poorly Thought-Out Government Policies
The Trump administration has combined two policies – a crackdown on immigrant workers and restrictive trade through tariffs – that negatively impact food prices for consumers and farmers.
Candidate Trump attempted to tamp down fears of farmers who rely on migrant workers by saying his immigration crackdown would focus on convicted criminals. However, in practice, he has taken a shotgun approach, rounding up people who have come to the U.S. for years to harvest our fruits and vegetables. The result has been photo ops (good and bad) and a drastic reduction in farm workers.
Analysis by the Pew Research Center determined that 1.2 million immigrant workers have disappeared from the nation’s workforce.
“California has borne the brunt of the exodus,” states an editorial in Santa Rosa, CA, The Press Democrat. “Historically, the state’s farms rely on immigrants for nearly two-thirds of their labor, and almost half of those are undocumented. When immigration raids started, many immigrants simply stopped showing up for work out of fear of being arrested. Others have been rounded up by ICE agents and deported.
“The timing could not be worse. The harvest season ramps up this time of year. Without enough hands, some produce will go bad before it can be picked.”
No Change Forthcoming
“Our great Farmers and people in the Hotel and Leisure business have been stating that our very aggressive policy on immigration is taking very good, long-time workers away from them, with those jobs being almost impossible to replace,” the president wrote on Truth Social in June. He ended that post with the words, “Changes are coming!”
So far, he has not put actions behind those words. Although the One Big Beautiful Bill Act did set aside $66 billion in farm subsidies to be spread over 10 years. Unfortunately, many of those provisions do not take effect until fall 2026. Meanwhile, the same legislation boosted spending on immigration and border enforcement to $170.1 billion.
Potential Multiyear Problem
At the same time, tariffs and trade uncertainty are weighing heavily on farmers.
China has been the leading consumer of American soybeans for years. Typically, China purchases over 50% of what is grown here each year.
In response to Trump’s tariffs, China has put a 34% tariff on American soybeans, reports the American Soybean Association. As a result, the Chinese market has turned to Brazil and Argentina, where prices are cheaper.
Other countries besides China have also turned away from U.S. agriculture and imposed retaliatory tariffs. That trend is not a hopeful sign for farmers.
“If we don’t get a deal in the next few weeks, I think this turns what is hopefully a one-year problem into a multiyear problem,” Justin Sherlock, a North Dakota farmer, told the New York Times.
Opportunity Awaits
The Trump team has a chance to turn things around this week.
Treasury Secretary Scott Bessent will lead a team of negotiators meeting with Chinese officials this week in hopes of improving trade. Coincidentally, Bessent might have an extra incentive, since he owns $25 million in North Dakota farmland that earns from $100,00 to $1 million a year from rents to farmers who grow corn and soybeans.
“Are we going to lose a generation of farmers because of the trade war?” Sherlock asks. “I think that’s what we’re fast approaching.”
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