Business Strategies

Rising Commodity Prices Make For Rise in Food Prices

Consumers aren't the only ones feeling the pinch on the grocery store shelves.

Compared with October 2009, beef prices increased 1 percent, up 7.3 percent in October 2010, with steak prices up 6.8 percent and ground beef prices up 7.9 percent, according to the USDA's Food Price Outlook, 2011. Pork prices increased 1.1 percent, up 12.8 percent, while Poultry prices rose 1.1 percent in October, up 3.1 percent, with chicken prices up 2.7 percent and other poultry prices (including turkey) up 4.3 percent. For most of 2009, retail meat prices were lower than the previous year due to weak demand stemming from the global recession. However, with rising commodity prices and input costs over the past six months, beef and pork prices are now significantly higher than in 2009.

Egg prices dropped 9.6 percent in October 2010 (following a 9.2- percent increase in September), so that egg prices are 0.7 percent above the October 2009 level. Dairy prices increased 1.1 percent, up 3 percent from 2009 levels. Within the dairy category, milk prices rose 0.8 percent, up 5.8 percent, and are expected to be higher in 2011; cheese prices rose 1.3 percent, up 4 percent; ice cream and related product prices rose 2.6 percent but are 1.3 percent below 2009; and butter prices increased 4.4 percent, up 25.4 percent since 2009. 

Fresh fruit prices increased a seasonal 1.4 percent in October 2010 due to increases in banana and other fresh fruit prices. However, the fresh fruit index is still down 2.3 percent overall from 2009, with apple prices up 3.7 percent, banana prices down 4 percent, citrus fruit prices down 0.7 percent, and other fresh fruit prices down 3.8 percent. The fresh vegetable index increased a seasonal 0.7 percent in October due to increases in tomato and other fresh vegetable prices. Since 2009, fresh vegetable prices rose 4.4 percent, with potato prices up 1.2 percent, lettuce prices up 0.4 percent, tomato prices up 6.6 percent, and other fresh vegetable prices up 5.6 percent. Processed fruit and vegetable prices decreased 1.1 percent in October and are 1.6 percent below the October 2009 level.

Cereals and bakery product prices were down 0.1 percent from September to October 2010, down 0.6 percent from 2009, with bread prices down 0.8 percent and breakfast cereal prices down 1.4 percent. Higher wheat commodity costs should begin to affect cereal and bakery product prices over the next few months. Sugar and sweets prices were up 0.2 percent in October, 3.2 percent above 2009 prices. Within the nonalcoholic beverages category, carbonated drink prices were down 1.7 percent in October, down 1.1 percent from 2009; coffee prices rose 0.8 percent, up 3 percent, and nonfrozen noncarbonated juices and drinks prices were up 0.8 percent, but are 1.8 percent below the October 2009 level.

Incidentally, historical data indicate that fresh fruits and vegetables and egg prices are the most volatile food prices that ERS tracks. Grain price changes affect the price of meats, poultry, eggs, and dairy products more than the prices of other food items and to a lesser extent cereals and bakery products. Because these items account for more than half of the at-home food dollar, price changes for these categories can significantly affect the Consumer Price Index (CPI) for food at home.