USDA Expects Lower Food Price Inflation

USDA expects food prices to rise at the lowest rate since 1992, while many agricultural commodity prices have increased recently, according to Reuters.

The revised figures now predict an increase of 0.5 to 1.5 percent in 2010 rather than the previous estimate of 1.5 to 2.5 percent.  This increase "could be the lowest since food prices rose 1.2 percent in 1992."

The Wall Street Journal reports that Ephraim Leibtag, the USDA economist responsible for the forecast, said that food companies "are taking a wait-and-see attitude about passing along commodity costs."

Wheat prices have increased largely due to a drought in Russia.  "Compared with a year ago, the farm-level price of soft red wheat grown in the Midwest is up 91%, the price of hogs in Iowa and southern Minnesota is up 52%, the price of eggs is up 32% and the price of corn in central Illinois is up 15%."

Food executives are hesitant to pass along higher costs to consumers "for fear that they might shop elsewhere".   If the economy improves, however, USDA expects food price inflation to rise at a more typical rate of 2-3% in 2011.

To read the Reuters story, click here.
To read the Wall Street Journal story, click here.

Posted: 08/26/2010