The Association Between Food Surplus Costs and Retail Prices

Little research exists on the relationship between food surplus costs and retail prices. The United States (U.S.) spends about $2 trillion each year on food, with the total value of all surplus food surmounting $400 billion. In most industries, surplus has a negative correlation with price; however, available data demonstrates that increases in food surplus costs follow similar trends to increases in prices. This study aims to assess surplus costs at the retail level of the supply chain, combining them with data on the defined factors influencing food costs including agribusiness, transportation, wholesale trade, and energy. A random effects panel regression is conducted, analyzing the prices and costs of 35 food types over the years 2010-2015. Results illustrate that a 1% (13%) increase in surplus costs correlates to a 0.36% (3.6%) increase in prices. Another interpretation is that a $175 million increase in surplus costs is related to a $0.36 increase in average retail price of the observed food types. There were many limitations with this paper, much of which is related to data availability, but this provides numerous outlets for further research into the topic. This study demonstrates how reducing food waste in America may have economic outcomes that would benefit consumers in the form of decreased food prices.