Supermarket Shocker: Food Prices Are Poised to Surge 6 Percent
Thursday, 17 Mar 2011 11:43 AM
By Forrest Jones 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.
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. © Moneynews. All rights reserved. |