March 4, 2011

USDA forecasts 3-4% rise in US food prices

The USDA has forecasted that food prices will jump between 3-4% this year, after rising in 2010 by the slowest rate since 1962.

Prices of corn, wheat, and soy - crops that are ubiquitous in US food products - are up 88%, 76%, and 37%, respectively, from 12 months ago. The soaring cost of fattening livestock with grain is also helping to lift prices of hogs and cattle to record-high levels. On top of all that, rising oil prices are lifting the costs of packaging and transportation.

The USDA raised its 2011 food-inflation forecast on 24 February, from the 2%-3% range it had been projecting since July. The government's consumer-price index for all food rose 0.8% in 2010. A change of one percentage point in the food-inflation rate is equal to about US$12 billion in annual spending.

Some meatpackers seem to be having the most success pushing along their higher costs, in part because per capita supplies of beef and pork are shrinking, which gives them some pricing power. Retail beef prices in January were 9.7% higher than in January 2010 while retail pork prices were 9.9% higher.