Food-price inflation to increase at lower rate

by Bryan Salvage
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WASHINGTON – This year, food-price inflation is expected to increase 0.5% to 1.5%, the lowest rate of increase in food prices since 1992 when prices rose 1.2%, according to the U.S. Department of Agriculture’s (U.S.D.A.’s) Economic Research Service (E.R.S.). In its previous forecast in July, E.R.S. expected food prices in 2010 to increase 1.5% to 2.5%, according to the most recent edition of the National Chicken Council’s Washington Report.

Food-at-home (retail store) prices are forecast to increase 0.5% to 1.5%, while food-away-from-home (restaurant) prices are forecast to increase 1% to 2%. E.R.S. predicts only a modest impact from global economies recovering somewhat from the 2008-09 recession. World economic activity remains below pre-recession levels, resulting in a manageable level of global demand for U.S. food products and agricultural commodities.

The U.S. all-food consumer price index (C.P.I.) increased 1.8% between 2008 and 2009. Food-at-home prices increased by 0.5% -- the lowest annual increase since 1967 – with dairy prices declining 6.4% and fresh produce prices dropping 4.6%, while food-away-from-home prices rose 3.5% in 2009. The C.P.I. for all food for July 2010 was 0.9% above the July 2009 level. The food C.P.I. has now returned to a positive annual growth rate, following six consecutive months – September 2009 to February 2010 – of declines in food prices, a first since 1959.

Retail poultry prices increased 0.6% in July from a month earlier and are 1% above prices last year at this time. Beef prices decreased 0.2% in July but are 6.7% above last July, with steak prices up 4.2% and ground beef prices up 8.2%. Pork prices increased 1.6% in July and are 6% above the level last July.

Retail meat prices for most of 2009 were lower than the previous year because of weak demand stemming from the global recession. However, as the overall U.S. economy began to recover from the recession, beef and pork commodity prices rose, and retail meat prices are now higher than in 2009.

Increased inflation for most meat products in 2010 is a strong possibility, as reflected in E.R.S.’ updated forecast for pork prices, predicted an overall increase of 3% to 4% for 2010, the report noted.

The E.R.S. wholesale composite chicken price in July 2010 was 76.3 cents per lb., and the retail composite chicken price was 178.5 cents per lb., for a wholesale-to-retail marketing spread of 102.2 cents per lb. In July 2009, the E.R.S. wholesale composite chicken price was 79.2 cents per lb., while the composite retail price was 174.9, for a wholesale-to-retail marketing margin of 95.7 cents per lb.. Thus, the retail marketing margin in July 2010 was 6.8% greater than a year earlier.
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