After two years of relatively low food inflation, Americans face escalating costs at the supermarket as surging grain, livestock and energy prices are passed along to the retail level, the U.S. Department of Agriculture said.
“Higher commodity and energy prices are expected to lead to a stronger increase in retail food prices in 2011,” the USDA’s chief economist, Joe Glauber, said during a Feb. 24 address at the agency’s annual Agricultural Outlook Forum.
This year, the Consumer Price Index for all food may increase by 3 percent to 4 percent from 2010, Glauber said, citing a USDA forecast. Last year, the CPI for all food rose 0.8 percent, the lowest annual food inflation rate since 1962, he said.
During the previous run-up in commodity prices in 2007-08, the CPI for food rose by an average of 4.7 percent over those two years, Glauber said.
Rising food costs reflect a strengthening economy, as well as smaller cattle and hog herds and soaring prices for corn, wheat and soybeans. Also, the U.S. ethanol industry is using records amount of corn, helping send projected supplies of the country’s largest crop to a 15-year low.
Food commodity prices are up 81 percent since the beginning of 2006 and have already surpassed a 2008 peak, Ephraim Leibtag, a USDA economist, said Feb. 24 during a separate presentation at the forum.
Among specific grocery categories such as beef and pork, prices have already been rising well-above broader food inflation rates.
A meat price index tracked by the U.S. Bureau of Labor Statistics rose 8.4 percent during January on a seasonally-adjusted basis, compared to January 2010. That was the largest year-over-year gain for that month since 2004. Meat prices have climbed an average of 7 percent over the past six months, according to bureau data.
Rising meat prices are a concern for beef and pork producers because unemployment remains high, meaning consumers may opt for cheaper meats, such as chicken, analysts have said. High corn prices are squeezing beef and pork producer margins, discouraging herd expansion.
Among specific cuts, bacon nationwide averaged $4.25 a pound at retail during January, up from $4.16 in December and up 17 percent from $3.63 a year ago. Bacon hit a record $4.77 in October. Choice-grade, boneless sirloin steak averaged $6.27 a pound last month, up from $6.07 in December and up from $5.31 in January 2010.