Why did wholesale vegetable prices shoot up?

Wholesale prices in this economy are going up. The latest producer price index, out from the Bureau of Labor Statistics Thursday morning, showed an across-the-board price increase of 3.3% in July, compared to a year ago.

About a quarter of that increase was driven by a huge spike in one particular category: “fresh and dry vegetables.” Wholesale prices — that is, what your grocery store pays to source those veggies — rose a whopping 38.9%.

One reason? Wholesale vegetable prices are just volatile, said William Masters, a food economist at Tufts University.

“So this is a number that just bounces up and down like a cardiac chart at the doctor’s office. And the current bounce up is not outlandish,” he said.

Still, I asked Brown University political economist Mark Blyth if he could explain the bounce.

“No, I can’t. And no one can. Because this could come from a whole host of things, right?” he said.

Blyth said it’s too soon to pinpoint the exact cause, but he has some ideas.

“Could this simply be a result of climate change? Could this be the fact that things are hotter and drier? Yes,” he said.

Or, he said it could be that some farms in the U.S. are short on labor due to President Donald Trump’s immigration crackdown. 

“ This could literally be the fact that many of the workers that were picking these things in the fields are actually afraid to go to work,” Blyth said.

Another possible explanation? Tariffs.

“Over a third of our vegetables are imported,” said David Ortega, a food economist at Michigan State University.

He said, on average, those veggies are incurring higher tariffs than a year ago. “Things like tomatoes, asparagus, cauliflower, cucumbers.”

Mexican tomatoes, which are most of the fresh tomatoes sold in the U.S., are taxed at 17%. The PPI report only includes domestically produced vegetables, not imports. But by limiting overall supply, Ortega said tariffs can cause homegrown veggie prices to rise too.

“Now there’s less supply available to meet the demand, and so that’s gonna raise the price up,” he said. 

And because the grocery stores sourcing all that food run on such thin margins, Ortega said it would be hard for them to “eat” any sustained increase in wholesale prices.

“We could see some of those cost increases get passed on to the consumer in the coming months,” he said.

If those wholesale prices don’t settle down soon.