Food prices a sticking point this year

By Sarah Hills

- Last updated on GMT

Related tags Food prices Economics Price

Retail food prices are expected to remain ‘sticky’ in 2009, according to a new study, adding weight to claims that food manufacturers may struggle to pass on cost pressures to consumers.

At the supermarket, food prices decreased slightly in the fourth quarter of 2008, according to the latest American Farm Bureau Federation (AFBF) Marketbasket Survey.

The informal survey showed that the total cost of 16 basic grocery items in the fourth quarter of 2008 was $48.19, which is down about one percent (or 49 cents) from the third quarter of 2008.

Jim Sartwelle, an AFBF economist, said: “Despite the recent collapse in oil prices and steep declines in farm commodity prices, food prices have not yet declined significantly and may not for quite some time.

“Sticky prices, once a somewhat obscure economic concept to most food consumers, are the new reality as we move into 2009.”

In economic terms the word sticky describes a situation where something is resistant to change, despite shifts in external forces such as demand and supply.

However, Sartwelle added that if the new year brings lower global demand for US commodities as the world economic turmoil continues, retail food prices may moderate somewhat.

Price pressures

A recent report from Fitch called the Fitch 2009 US Packaged Foods Outlook: Sector Stability Despite Weak Economy said that despite recent drops in commodity and oil prices, input cost pressure is not expected to subside materially for at least several months.

And the higher pricing achieved by packaged food companies recently was likely to continue in 2009, but it cautioned: “The magnitude of pricing actions consumers are willing to accept when they are already being squeezed by the shaky economy is a delicate balance.”

The shopping basket

AFBF conducts its informal quarterly survey to reflect retail food price trends. Participating in the latest survey, which took place in October, were 133 volunteer shoppers in 37 states.

Of the 16 items surveyed, 11 decreased and five increased in average price compared to the 2008 third-quarter survey.

Apples, flour, cheddar cheese and bacon showed the largest retail price decreases ranging from 29 cents to 14 cents.

Several survey items dropped in price by 10 cents or less. These are whole milk, ground chuck, corn oil, pork chops, sirloin tip roast, vegetable oil and a five-pound bag of potatoes.

Mayonnaise increased in price for the fourth consecutive quarter, up 30 cents to $3.57 for a 32-oz. jar. Toasted oat cereal increased by 16 cents to $3.13 for a 9-oz. box. White bread increased 9 cents to $1.88 for a 20-oz. loaf. Large eggs increased 7 cents to $1.78 per dozen. Whole chicken fryers increased 2 cents per pound, to $1.45.

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