WHAT IS THE power of competition in the retail food marketplace? Considerable. After five years of placing at or near the top in annual food editor's market basket survey, Washington dropped to 11th in the survey taken in 21 cities on June 19. Despite an average price increase of 5.13 percent over the 1979 market basket, the cost here for the 35-item sample actually dropped.

The main reason? The District's sampling, which included only Giant and Safeway last year, was expanded to include Magruder's. The store located on Connecticut Avenue just south of Chevy Chase Circle, contributed the lowest price on 11 items. (In each city, an editor is allowed to survey three competing stores with the low price of the three for each item going into the market basket.) Magruder's was included because of its high volume. The firm has three other stores, one in Rockville, one in Vienna, and one in Annapolis and therefore is accessible to shoppers throughout the Metropolitan area.

Another contributing factor, according to observers of the supermarket scene, may be heightened competition. With Giant and Safeway dividing more than 60 percent of the area's grocery sales, Washington has been one of the least competitive major markets in the nation. In the past year, however, stores with names such as Plus, Basics, No Frills, and Bag and Box have opened in the area. In various ways they cut operating expenses with the object of offering lower prices. The two chains have reacted to this threat to their domination in a variety of ways, and, as the trade journal Food World noted in its May issue, the first two Basic stores (sponsored by Grand Union) to open "have created probably the most competitive factor in the marketplace in the last five years."

Some of the reaction, such as increased coupon offerings and other promotional acivities, would not be reflected in the market basket. It is worth noting, however, that nearly twice as many items were on special on the shopping date this June as opposed to a year ago (nine instead of five). Also, the number of items with identical prices in Giant and Safeway sank from 18 to 15. Only one item was priced the same in all three.

Washington's total market basket (one new item, canned corn, was added this year) was $41.77, one percentage point above the national average and good enough to place it below such diverse cities as Little Rock, Dallas and Chicago. It is worth noting, however, that the groceries in the market basket still are more expensive here than in such other East Coast cities as Philadelphia, New York and Boston.

The cost here was well above the average for flour, coffee, pork chops, canned peaches and pineapple, ice cream, frozen orange-juice concentrate, bacon, wieners and peanut butter. Below average were prices for milk, eggs, rump roast, sirloin steak, bread, sugar,dried beans, lettuce and bananas. Of these items, all but the first three were on special the day the survey was taken. Nonetheless, the costs of coffee, peaches, ice cream and orange juice were high or tied for high across the nation.

Supermarket chain spokesmen have long cited the high cost of doing business locally and the sophisticated nature of the Washington consumer as the primary causes for the apparent high cost of groceries here. They also reject the validity of surveys such as this one, contending that quality is not weighed in the comparisons and that far too few items are included to give a realistic portrait of comparative price structures.

According to surveys, two-thirds of America's grocery shoppers visit at least two stores a week. The time and detective work involved may be worthwhile. In the June 19 comparison, Giant was $2.78 less expensive than Safeway for 34 items. (There was no exact comparison for two of them.) Last year the market basket was 77 cents cheaper at Safeway. On the other hand, Magruder's had the high price on 11 items, exactly the same number as were low, and was tied for high on five others.

The survey is coordinated by Ann McDuffie, food editor of the Tampa Tribune. Once again, Tampa was the low city. "I ask why," she said, "and the supermarket people tell me competition." There are eight chains doing business in Tampa.