The Iran Conflict and Consumer Food Prices: A Broad but Lagged and Sticky Shock

The initial public reaction to an oil price shock reaching $110 per barrel is often to project near-immediate, dramatic increases in grocery prices. This instinct overstates the direct farm-to-retail transmission channel in a straightforward and measurable way. The USDA Economic Research Service tracks how each dollar of consumer food spending is distributed across the supply chain in its Food Dollar Series. The picture it reveals is sobering for those who expect large, rapid retail food price responses driven purely by higher farm input costs.

For 2023, the farm share was only 15.9 cents of every food dollar spent by consumers — the remaining 84.1 cents went to the marketing system: food processing, packaging, transportation, wholesale and retail trade, foodservice operations, finance, and advertising. For food-at-home purchases (grocery stores and supermarkets), the farm share rises to about 24 cents per dollar, but for food away from home — restaurants and foodservice — it falls to only 5.4 cents of each dollar.