Commodity price pressure being passed on to consumers

By Chris Jones

- Last updated on GMT

Related tags Cost Maize

The soaring cost of many major commodity products is being passed
on to US shoppers, according to a survey by the American Farm
Bureau Federation (AFB).

In the first quarter of 2008, the total cost of 16 basic grocery items in the first quarter of 2008 was $45.03, up about 8 per cent or $3.42 from the fourth quarter of 2007, the AFB said. This equated to a nine per cent rise year-on-year. The biggest cost increase was for a five-pound bag of flour, which rose by 69 cents to $2.39, a reflection of the rising cost of wheat and other grains as a result of poor harvests and a shift towards growing grains for biofuels rather than food. Other items that increased in price were cheddar cheese, up 61 cents to $4.71 per pound; corn oil, up 58 cents to $3.01 per 32-oz. bottle; a dozen large eggs, up 55 cents to $2.16; vegetable oil, up 38 cents to $2.63 per 32-oz. bottle; a 20-oz. loaf of white bread, up 16 cents to $1.78 and apples, up 13 cents to $1.40 per pound. Bacon was the only item in the survey that stayed the same in price, at $3.35 per pound. In contrast, whole milk prices were down 10 cents to $3.81 per gallon, while the cost of pork chops were down eight cents to $3.31 per pound. "More than a third of the increased cost reported this quarter is attributed to two oil products and mayonnaise, which is oil-based. As expected, the drop in price for vegetable and corn oil observed in the last quarter of 2007 appears to have been temporary,"​ said Jim Sartwelle, an AFBF economist. The decline in the cost of pork and the stable price for bacon were something of a surprise because of the impact that rising grain costs have had on the wider meat sector in the US. But pork production has risen sharply in the first few months of 2008, outpacing consumption, and inevitably forcing down prices, despite the rise in input costs. But commodity costs were not the only reason for the increase. "It is important to note the contribution of runaway energy prices to the retail cost of food,"​ Sartwelle said. "Transportation, processing, and packaging all cost significantly more now than in prior years." ​ Food price inflation is not expected to slow down any time soon: indeed, the US Department of Agriculture expects the cost of food to rise at a faster rate than general inflation until at least 2010, increasing by at least four per cent this year. Data from the Bureau of Labor Statistics shows that food prices rose by 5.8 per cent on average last year in the US.

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