U.S. food prices continue to rise on commodities surge

U.S. food prices will continue to rise at above-trend rates at least through 2009, and most likely, for a considerably longer period.

by Joseph Lazzaro

The reality of rising food prices in the United States sometimes registers with consumers in subtle ways.

A shopper who regularly buys groceries at the Stop & Shop in the New York suburb of Larchmont, New York, scans a loaf of bread and suspects that the scanner must have made a mistake because it indicated $2.49 for the loaf.

Then the shopper realizes the scanner didn't make a mistake: that loaf of bread, which was just $1.79 or thereabouts a few months ago, is now more than two bucks -- a 39% price jump.

Whether you realize it or not, food prices are ramping higher, due to surging commodity prices and rising demand for high-protein foods in emerging market countries. Food prices rose 5% in 2007, according to U.S. Department of Agriculture data.

Still, if you're looking for food price increases that modest, stay out of metro U.S. regions, such as metropolitan New York, where economist Glen Langan lives. Prices in those areas are likely to be higher for many items, he said, due to higher costs for labor and taxes, among other factors.

Global food demand rising

Still, some items have rocketed higher -- meat, poultry, eggs, cereal -- just about everywhere, Langan said, and the reason is basic enough. As nations like China and India develop, their diets are becoming richer, with more meat, poultry and grain. "It's not surprising that as the middle class expands in these nations they're eating more like Americans, which increases demand for these foods, forcing up their price," Langan said. Record high oil prices are also pushing up food costs, due to higher transportation and preparation costs, he said.

Further, Langan can not only speak as an economist, but also as father with a large food bill. Langan and his wife Susan have four school-age children. A typical family of four spends $904 per month on groceries, according to the U.S.D.A., the AP reported. The Langans' monthly bill "is considerably north of that, as you might guess," Langan said.

Americans have done a pretty good job containing food expenses by substituting lower-cost food alternatives, purchasing food in its essential form (such as fresh vegetables and fruit), buying in bulk where possible, and eliminating non-essential items, among other economizing tactics, he said.

Moreover, that economizing will have to continue, in Langan's interpretation, because the trend of rising demand for meat, poultry, grains, and other food stuffs is long-term, and global. Further, food processors have not fully passed on their higher energy costs. Those two fundamentals, among others, means U.S. food prices will continue to rise at above-trend rates at least through 2009, and most likely, for a considerably longer period, he said.