US food prices could surpass 2008 levels, says USDA

By Caroline Scott-Thomas

- Last updated on GMT

Related tags Food prices Consumer price index Inflation

US food prices could surpass those seen during the 2008 food price crisis this year, as higher commodity and energy prices cause food makers to pass on costs, according to the US Department of Agriculture (USDA).

The USDA predicted late last year that food prices would rise during 2011, and in recent weeks several major food manufacturers have said they intend to raise prices on the back of stronger commodity costs. The USDA had been saying since July that food price inflation – after dropping to its lowest rate in 18 years – would accelerate during 2011, by 2 to 3 percent. But it is only in the last week that the agency revised its forecast, saying that it predicts the Consumer Price Index (CPI) to rise by 3 to 4 percent during the year.

Over the past two years, CPI inflation for all food – that which is eaten at home, as well as in restaurants – fell to its lowest level since 1962, the USDA said, rising only 0.8 percent during the period.

“Although food price inflation was relatively weak for most of 2009 and 2010, higher food commodity and energy prices have recently exerted pressure on wholesale and retail food prices,”​ the USDA said. “These cost pressures, along with strengthening global food demand, have pushed inflation projections upward for 2011.”

Although the projected increases in food prices will undoubtedly impact Americans, particularly in the current economic climate, market research organization the Nielsen Company points out that food accounts for a much smaller proportion of household spending in the United States than it does elsewhere. In the US, food represents 6.9 percent of average household expenditure, compared to more than 11 percent for the average Austrian household, 15 percent in South Korea, and 45 percent in Pakistan. Per capita, that translates as $2,208 in the United States, $2,860 in Austria, but just $309 in Pakistan, the market researcher said.

In addition, Nielsen cited continued unrest in the Middle East and northern Africa as possible factors for increasing global oil prices, with potential impacts on the cost of food in the United States.

“We will likely see increased inflationary pressures from rising fuel prices have a similar impact on US consumers as experienced in 2008,” ​it said, citing more at-home consumption, value buying and increased coupon usage.

“Global demand for US food in developing countries is great for US exports, but those gains may also lead to higher food prices for US consumers,”​ Nielsen said.

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