Tags: us | economy | food | rise | 2011 | grain

Supermarket Shocker: Food Prices Are Poised to Surge 6 Percent

Thursday, 17 Mar 2011 11:43 AM

Food prices in the United States could rise 6 percent in 2011, well above the government's forecast for a 4 percent increase from 2010, private analysts say.

"If food inflation comes in at 6 percent, it would be the most dramatic increase since 1982," William Lapp, a consumer foods economist with his own firm, Advanced Economic Solutions, tells The Christian Science Monitor.

"We had a 10-year period, from 1972 to 1981, when annual food prices rose sharply – including a two-year period when increases averaged 8.7 percent."

Food prices are rising in the U.S. and abroad due to increased demand in growing economies like Brazil and China, a weaker dollar, which is boosting U.S. food exports and leaving less supply at home, and also due to demand for foods such as corn to make biofuels like ethanol

Thursday, the U.S. said Americans paid more for food and gas in February, as consumer prices rose at the fastest pace in nearly two years.

The Consumer Price Index rose 0.5 percent in February, the largest increase since June 2009, the Labor Department said. Core prices, which exclude food and energy, rose only 0.2 percent, matching January's gain.

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Farmers work in a vegetable field.
Food costs increased 0.6 percent, the most since September 2008, the Associated Press said. Food costs rose for almost all major grocery store groups, including meat and eggs, dairy and fruits and vegetables.

The cost of cereals and baked goods was flat, the only group that didn't increase.

Prices for many agricultural commodities, including corn, wheat and soybeans, have doubled since last summer due to bad weather around the globe. Those higher prices are now showing up on store shelves. Vegetable prices also soared last month due to harsh winter freezes in southern U.S. states.

Paul Ashworth, an economist at Capital Economics, told the Associated Press that his firm has warned since last summer that spikes in commodity prices would eventually work their way down to wholesalers and consumers, "and here it is. There is plenty more to come over the next few months."

More food and gas price increases are in the pipeline. The Labor Department said Wednesday that wholesale prices jumped 1.6 percent in February, the largest increase since June 2009. Wholesale food prices rose 3.9 percent, the biggest increase since November 1974.

"The more you have to spend on a loaf of bread and a pound of ground beef, the less you have to spend on everything else," says Mark Zandi, chief economist at Moody's Analytics.

"It's like a tax increase, although it's not quite as bad as rising oil prices, since at least the revenues go to U.S. farmers, truckers, and ag-equipment manufacturers."

Wendy's, paying higher prices for tomatoes, now puts them on hamburgers only by request. Starbucks and Dunkin' Donuts have raised prices because they pay more for coffee beans. Supermarkets warn customers that produce may be of lower quality, or limited, the AP reported.

"It has thrown the whole industry into a tizzy," says Dan Bates, director of merchandising for the produce division of grocery chain Supervalu Inc.

Elsewhere, some say higher food prices could translate into increased hunger in the United States.

"With persistent high unemployment, oil fueling more than 95 percent of America's transportation system, and transportation costs running 24 percent of income in suburbia and in exurbia, 35 percent, America's middle class is extraordinarily exposed," says America Foundation's Smart Strategy Initiative Director Patrick Doherty, according to CNN.

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Food prices in the United States could rise 6 percent in 2011, well above the government's forecast for a 4 percent increase from 2010, private analysts say. If food inflation comes in at 6 percent, it would be the most dramatic increase since 1982, William Lapp, a...
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2011-43-17
Thursday, 17 Mar 2011 11:43 AM
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