Will the Cost of Groceries Continue to Rise in 2023?

Consumers may need to brace for further cost increases next year.

The cost of groceries skyrocketed this year, putting pressure on the bank balances of many Americans. The combination of avian flu, supply chain pressures, and increasing energy and labor costs have all had an impact on food prices, particularly staples like eggs, flour, and butter.

According to the Bureau of Labor Statistics (BLS), average food costs in October were up 10.9% on the year before. The BLS distinguishes between food at home and dining out, and its data shows that there was a bigger jump in the cost of eating at home. The average cost of groceries rose 12.4% between Oct. 2021 and 2022. So what does 2023 have in store? Will we see even further increases in grocery costs or might prices come down?

USDA says growth in food prices will slow

Unfortunately, many of the reasons that food prices have risen aren't going to disappear with the arrival of a new year. As a result, the USDA predicts that food prices will rise between 3% and 4% in 2023. If the prediction is correct, it is a much slower growth than we've seen this year, but it still means the cost of groceries will go up. "Food prices are expected to grow more slowly in 2023 than in 2022, but still at above historical average rates," said a USDA press release.

The USDA estimate may be overly conservative. Miguel Patricio, CEO of food and beverage giant Kraft Heinz told Fortune that consumers need to prepare for higher prices. He thinks inflation will continue to be an issue and that there'll be more supply chain hiccups as well.

The impact of Russia's invasion of Ukraine also looms large. According to McKinsey, Ukraine and Russia supply about 30% of the world's grain and 15% of its corn. The ongoing conflict could precipitate a global food crisis next year as production in Ukraine could decline significantly. In addition, fertilizer exports have already been severely disrupted, which will have an impact on food production around the world in 2023.

The U.S. is a big producer of both wheat and corn, so it will be cushioned against some of the global shortages and price hikes. Nonetheless, this year shows that what happens in the rest of the world can have big consequences on the average American's shopping basket.

How to reduce your grocery bill

Grocery prices aren't the only thing that have shot up this year. Inflation has also pushed up the price of housing, gas, utilities, and many other aspects of life. Some consumers have dipped into their savings accounts to cover the extra costs, while others have taken on debt. The challenge is that the longer prices continue to rise, the less sustainable these solutions become.

It isn't easy to cut costs, especially if you feel like you've already tightened your belt substantially. But if you haven't already tried the following ideas, they may help to reduce costs without significantly impacting your way of living.

• Switch to store brands or lower-cost stores: You may not notice the taste difference between big brands and generic, but you'll notice the difference on your grocery bill. Similarly, a low cost grocery story could generate significant savings on your regular shopping trip.
• Always make a list: Working from a shopping list means you're less likely to buy things you don't need, and reduces the temptation to make impulse buys. It also means you can minimize the number of trips you make to the store, which can also save you money.
• Maximize cash back opportunities: If you qualify for a credit card that pays solid rewards on grocery shopping, you'll at least be able to get something back on your shopping trips. Cash back apps are another way to earn rewards, and you might be able to combine the two for extra benefits.
• Use coupons: Keep an eye out for coupons that give discounts on products you buy regularly, especially more expensive items like laundry detergent or meat. Avoid the temptation to buy products you wouldn't otherwise have bought just because they are on discount -- that can often mean you spend more, not less.
• Buy in bulk: As long as you buy non-perishables and have space to store your bulk purchases, it can be a good way to save money. If you're able to batch cook, you might be able to stock your freezer with several meals, which also saves time in the kitchen.
• Reduce food waste: The USDA estimates that a third of the food produced in the U.S. goes into the garbage, some of it before it even reaches our shelves. Use food waste apps to get big discounts on food that would otherwise go to landfill. At home, freeze items that are close to their expiration dates and try to only buy fresh produce that you're going to cook.

Bottom line

It looks likely that grocery costs will continue to rise in 2023, though hopefully the increases won't be as dramatic as the ones we've seen this year. However, given that there's a lot of uncertainty about the job market and the wider economy, it makes sense to look for ways to reduce costs. Put simply, the more you can shave off your grocery costs, the more money you'll have for other things.