Even higher food prices on the horizon
Prices have eased at the gas pump lately, but not in the grocery stores. We're seeing the highest food price inflation in 20 years, and the government's forecasting more increases in 2009. John Dimsdale reports.
Eating a burger (Photo by Joe Raedle/Getty Images)
More on The Economy, Retail, Agriculture, Food
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Kai Ryssdal: For a change today, we start not with Fannie Mae, Freddie Mac and the woes of the financial system, but with the vagaries of the international oil market. Crude stepped up today by the biggest percentage gain in two months -- 4.9 percent, $5.62 cents to close above $121 a barrel.
The experts have been warning that the give-back in prices this summer wasn't going to last. It hasn't for oil. It might not for gas. And that is going to spell still higher prices in lots of other areas. The Department of Agriculture came out today with its prediction for food prices next year -- 4 to 5 percent increases on top of this year's already steep gains. Marketplace's John Dimsdale looked into why the highest food inflation in 20 years might be sticking around for a while.
John Dimsdale: Eggs, dairy products and cereals are up 10 percent or more this year. But the USDA says another big part of the American diet has seen only moderate price increases. Beef, poultry and pork will be up only 3 percent this year. Ephraim Leibtag with the department's economic research service says next year meat price increases will almost double.
Ephraim Leibtag: In general, retail food prices take anywhere from three to six months to adjust to higher commodity costs. But the lag may be longer than that six months -- could be over a year's time -- for the cattle cycle and the growing of products that end up being pork, poultry and beef.
Even though energy costs are off their highs, and corn and soybean harvests are projected to be near record levels, meat producers are facing feed shortages that will be felt at the grocery store next year. The American Meat Institute's Jesse Sevcik says livestock farmers are going out of business.
Jesse Sevcik: Right now, our cow herd hasn't been this small since the 1950s, USDA reported last week. Since the 1950s, we added about 130 million Americans. We're trying to get a feel on how much of shock this might be, we're definitely going to feel some pressure from this.
One way to escape some of the inflation at the grocery store is to head for a restaurant. Analysts say restaurants aren't passing on all their raw material costs to keep their customers coming. Don't feel like cooking tonight, by all means, go out.
In Washington, I'm John Dimsdale for Marketplace.
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From Little Rock, AR, 08/21/2008
It might not be a bad time to consider getting a freezer and a vacuum sealer, and start buying in bulk to weather the worst of it. I've done it, and will increase the size of my garden next year, too. Maybe a little good old fashioned canning, gardening, and belt-tightening will get us through this.
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