Friday, November 16, 2018
 USDA Predicts Food Prices Could Rise 4.5% in 2011  


The U.S. Agriculture Department on Tuesday said it expects retail food prices to increase 3.5% to 4.5% this year, after climbing just 0.8% in 2010, the slowest rate since 1962.

The midpoint of the new USDA outlook signals the sharpest acceleration in the food inflation rate from one year to the next since 1978, and makes the increase itself the biggest since 2008, when prices rose 5.5%. The agency issues a monthly forecast for retail food inflation, which has been building for several months, and had been predicting an increase of 3% to 4% since February.

The nation's big food manufacturers and supermarkets are having more success in passing along at least some of the pent-up costs from the farm commodity price boom that began with grains back in 2007, despite an unemployment rate of 9.1% that has many households watching their pennies. Still, many shoppers are trading down to cheaper products and even buying less of staples such as milk. As a result, many supermarkets and vendors are sacrificing volumes on products targeted for price increases.

Restaurant chains are having a harder time passing along their higher ingredient costs, as consumers opt for the cheaper alternative of eating at home. According to the Bureau of Labor Statistics, retail grocery prices were 6.3% higher in September than a year earlier, while retail prices of food eaten away from home were up 2.6%.

Craig Herkert, chief executive of Supervalu, said the nation's third-biggest supermarket chain by sales is managing to pass along to shoppers most of the 4% increase in commodity costs it is experiencing this year. But the retailer is going to unusual lengths to keep its price-sensitive consumers from bolting, such as offering single-serving packages of pork chops, fish and pizza for a dollar each.

-At the company's discount Save-A-Lot chain, where 40% of sales come from people using federal food stamps, stores open at midnight on the days each month that the cards are replenished so shoppers can stock up. In the middle of the month, when money is tight for many customers, the stores run sales.

"We haven't had this kind of inflation since the 1970s," said Mr. Herkert.

The USDA predicts food inflation next year of 2.5% to 3.5%, barring any shocks such as poor harvests. A change of one percentage point in the rate is equal to about $12 billion in annual spending.

Source: Wall Street Journal

Posted on Thursday, October 27, 2011 (Archive on Thursday, November 03, 2011)
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