Sticker shock at the supermarket: Food prices poised to rise
Filed under: Economy
If there's any silver lining to a recession -- albeit a thin one -- it's that consumer prices typically go down. Make no mistake, deflation is a sign of a sick economy, but at least the net effect of cheaper prices for the basic necessities -- food, clothing and shelter -- helps folks get by when they are struggling to make ends meet.But consumers should brace themselves for things to change, especially at the supermarket. As the global and U.S. economies emerge from the downturn, economists predict that there is going to be some sticker shock at the checkout line. Food prices, they say, are heading higher and when you combine that with an unemployment rate that's expected to linger near a three-decade high for at least another year, it's even more unwelcome news.
The U.S. Department of Agriculture expects overall food prices to rise as much as 4 percent in the U.S. by the end of 2010. Yet, some economists think they could climb by as much as 5 percent. Even using the government's more conservative numbers, the price for eggs is forecast to rise 3 percent and beef is seen increasing 2 percent. Lamb, seafood and fish? All three categories are expected to jump as much as 5 percent.
A 5 percent boost in your grocery bill may not seem terribly devastating, but consider this: If you spend $300 a week on groceries now, you'll need to squeeze a raise of about a thousand dollars a year out of your boss (don't forget withholding tax) just to keep up with higher chicken, beef, pork and dairy prices. Good luck accomplishing that little feat with a 9.8 percent unemployment rate and companies looking into every nook and cranny in order to cut costs.
No doubt it's frustrating to think that food prices will resume their long upward trend, but that's the reality of supply and demand in the global marketplace, economists say. After all, before the world economy fell off a cliff last year, food prices were soaring out of control thanks, in part, to growing demand from emerging markets like China and India and rising oil prices. From January 2007 to June 2008, global food prices rose 60 percent hitting an all-time high, according to the United Nations. (See chart)
This chart incorporates data from the 2007 and 2008 Food Outlook reports by the Food and Agricultural Organization of the United Nations. Author credit: Hugo Ahlenius/GRID-Arendal
Since that peak was hit, global food prices have retreated some 15%, meaning consumers are still paying about 45 percent more for food now than they were just two years ago. Bill Lapp, former chief economist at food giant ConAgra (CAG) and now president of Advanced Economic Solutions, a consulting firm in Omaha, Neb. that specializes in analysis of food costs, says at the peak of the global food crisis, food prices in the U.S. grew 6 percent. In 2010, he thinks they could jump 5 percent. Yikes.
"The challenge for next year will be the fact that pork, beef, chicken and dairy producers are all losing significant amounts of money," Lapp says. "As they reduce supplies, that will cause prices to rise. In 2008, cereal grains led food costs higher. In 2010, it will be meat and dairy."
Apart from the fact that food producers will need to raise prices in order to stay in business -- and appease shareholders -- there are global macroeconomic factors at play, too, says Michael Roberts, an economist at North Carolina State University. "Commodity costs [such as corn, soybeans and wheat] are coming up because traders are speculating that the recovery is coming," he says.
While it may not feel like it here at home, the giant economies of China and India -- not to mention other emerging markets in Asia and elsewhere -- are already starting to heat up. That increased demand will cause prices to rise -- in fact, you can already see it happening in the commodity markets, he says. (The classic Eddie Murphy film "Trading Places" illustrated this well: Yes, there really are people who profit from buying and selling pork bellies and concentrated frozen orange juice.) Meanwhile, the weak U.S. dollar means we will be exporting more of our homegrown food overseas, causing prices to rise at home.
Finally, let's not forget the impact of ethanol and other alternative fuels on food prices. The U.S. will enjoy record corn production in 2009, Lapp says, but more than a third of that will be diverted to ethanol production. And, unless Congress changes the Energy Independence and Security Act of 2007, the amount of corn going into our gas tanks will rise another 25 percent over the next five years. Cattle, chicken and hogs are fed corn and soybeans, meaning the folks who raise these animals will need to raise prices to pay their own higher feedstock bills.
Corn-based ethanol and soy-based biodiesel also has the effect of making these foodstuffs trade like energy. As crude and heating oil prices rise, so too do the prices of corn and soy in the marketplace -- as well as the cost to produce and ship the food. Corn prices have come down substantially during the recession, but as Lapp points out, they are still 50 percent above historical norms.
The end result? Consumers should keep an eye on oil prices, which not only impact what they pay at the pump but also what they pay at the checkout counter.
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Reader Comments (Page 1 of 33)
10-15-2009 @ 9:46AM
Recce1 said...
Michael, are you an agent provocateur trying to disgrace honest conservatives? Most racists I've met are union people beholding to their Democrat masters. None were in my opinion decent Christians by any Biblical definition that I know of.
10-15-2009 @ 6:14AM
none said...
So prices are going UP UP UP, and my social security check is going to go down. SS recipients are NOT getting a COLA this year, but the medicare premium is set to increase. At the same time, thousands and thousands of seniors who don't need SS because they're already richer than God continue to get it to add to their estates! Lot of crap if you ask me.
Reply
10-15-2009 @ 7:00AM
Sharon said...
To "None" and anyone else who is bothered by the rich getting Social Security - ANYone who pays into Social Security has a right to get his money back, yourself included, and you should expect to get a great deal MORE back than you paid. That is YOUR money, and the government has been hanging onto it for many years. They OWE you more than they deducted from your income because they owe you interest on the money they've been holding, and they owe the same thing to the "rich". But they can't give it to you because they never invested it and they never saved it. Congress spent it. If they were your broker, they'd be in jail. Don't begrudge the "rich" their Social Security, and don't believe anyone who says it's wrong for you to get out more than you paid in. This is your retirement money, earned by you and owed to you, with interest. It is not welfare for old folks.
10-15-2009 @ 8:02AM
Cathy said...
Congress always gets their COLAs and they are earning six figures and have taxpayer funded full health insurance and pensions. where's the outrage in that? plus they are deficit spending and allowing our dollar to be worthless. where's the outrage in that? Come on people. we have to take the power and money away from Washington. we can do it!
10-15-2009 @ 8:51AM
bfllaw said...
Yes, prices go up, taxes go up more and congress (democrats) get whatever they want. Study just came out that there are more Democrats than republicans earning more that $200,000.00. But no doubt you sheeple will continue to think that Republicans are evil rich -- and Democrats are just plain folks. Its a filthy lie spread by pathetic leftist media and union bosses.
10-15-2009 @ 8:54AM
margie said...
You sure said a mouth full there. Good for you......and THEY say trust in Obama.......no thanks.........I TRUST IN GOD!!!!!!
10-15-2009 @ 9:19AM
ginny said...
I agree with you .
10-15-2009 @ 9:29AM
Don said...
If you paid in you deserve to collect. Another legacy of the Reagan/Bush pilfering of this country/corporation run like a business.
10-15-2009 @ 10:01AM
common sense said...
My mother's social security check went up, plus she received a rebate check from the stimulus package. Plus she has a hefty pension check for being a government employee for 30 years. I've noticed an effort to scare seniors into thinking Obama is making things worse for them, when actually he's making things better. Instead of getting all frenzied, settle down and take a look at how things really are. They're bad because of the past 8 years, but this administration is working very hard to fix things.
10-15-2009 @ 10:05AM
Babs said...
In the past 10 years alone, Social Security benefits have gone up 20%. I wish I could say that about my salary. Quit whining.
10-15-2009 @ 10:38AM
art said...
You are a typical LIBBER they payed into it now it is there time to collect what do you want them to do dye fast
10-15-2009 @ 10:04PM
Jessica S, Naples, FL said...
This is NOT a temporary situation.
First of all, the COLA won't be added into next year's social security either. Why is this?
The government claims there's a recession and the payments should be adjusted downwards? Maybe so, AFTER the government changed the factors that go into figuring the index by which the COLA is measured every year. None of our every day expenses have gone down. They've ALL gone up.
While wealthy people keep their BUSH tax cuts, us seniors are stuck with Ronald Reagan's TAXES on social security and now THIS - A NEW SNEAKY TAX! After the index for inflation has been refigured to include items Seniors don't use or see, in order to keep from increasing the base Social Security income for Seniors, we are told that for the next TWO YEARS THERE WILL BE NO COLA!
DO WE KNOW WHAT THIS MEANS?
If we take the average social security income of $12,000 per year and apply the 2% COLA for the next two years as usually done, the social security base income for 2010 rises to $12,240.00. If we do this again for the next year as usually done, the social security base income increases to $12,484.80 for 2011..
One more time ... for 2012 we again apply the 2% COLA, and the base social security income rises again - this time to $12,734.50 for the year 2012. This is the year the COLA will be reinstated.
With the next two years cut out from COLA by the fancy footwork of the latest White House brains, we see the average social security base income remains at $12,000 for 2010. One more time ... as promised - (this is one promise we know Obama will keep), no COLA for the second year in a row - 2011. This means at the end of 2011, when we again start to figure in the COLA for 2012, we will be multiplying .02 x $12,000 = $240, and adding this to make the new social security base income for 2012.
AFTER THE ADMINISTRATION HAS FINISHED DEPRIVING US OF TWO YEARS of our earned and deserved social security COST OF LIVING INCREASE, when the COLA is reinstated after two years absence, our base social security income of $12,240.00 is short by nearly $500 per year!
With uninterrupted COLA increases, the base Social Security income in 2012 is $12,734.50. When the COLA is reinstated after two years absence, the COLA factor is multiplying a lower amount! This amount is lower by about $250 per year or $500 for two years.
THIS LOWER AMOUNT IS PERMANENTLY LOWER! EVERY YEAR EVERY AMERICAN SENIOR COLLECTING SOCIAL SECURITY WILL RECEIVE $500 less than he is entitled to by law, until the administration changed the law in order to fund their insurance company's Health Care "Reform".
What a COINCIDENCE! The new "HEALTH CARE REFORM" isn't supposed to go into effect until the year 2012. NOW WE KNOW WHY! EVERY SENIOR CITIZEN WILL BE PAYING FOR THIS JOKE OF A PROGRAM EVERY YEAR. EACH SENIOR WILL BE CONTRIBUTING THE $500 difference between what the law told us we were going to get when we retired and what the administration decided we could get after they steal $500 per year from every one of us to fund their bill.
This is the "excess" from "Medicare" - the "WASTE' that is being trimmed from "entitlements" that Obama promised to "trim". Will someone tell the jerk in the White House that Social Security is a program we all paid for? THEY ARE STEALING OUR MONEY AND THEY THINK WE AREN'T GOING TO NOTICE!
Wait until they start to tell us the $250 "windfall" we will be given for the year 2010 will "replace" the amount of social security we will not get. The $250 given in 2010 and probably in 2011 will become $10,000 when it is paid back after 20 years! WHAT A SNEAKY UNDERHANDED TRICK!
Sure, $250 makes up the immediate shortfall of $250 for 2010 when we don't get the COLA multiplier, but unless that $250 is added to our base social security income for the year as it is with COLA, it is worthless! Losing $250 x 2 years from our base social security income translates into losing $500 per year FOREVER- FOR THE REST OF OUR LIVES! This is $2,500 every 5 years ... $5,000 lost every TEN YEARS! EVERY SENIOR LOSING THE COLA FOR 2 YEARS STARTING AT AGE 65 WILL HAVE GIVEN THE GOVERNMENT $10,000 by the time they are 85!
TEN THOUSAND DOLLARS IS A LOT OF MONEY TO A SENIOR CITIZEN! What happened? We caught on to the terms of the first bills with rationed care and death panels for old people, so they had to find another way to exterminate us?
AGAIN WE SENIORS ARE THE SACRIFICIAL LAMBS! Is this because seniors usually don't burn down buildings or riot? Maybe we need to organize those seniors with dementia - see what they can think up?
Please tell whoever you can about this. Our White House is lying to us and our government is actually taking from the poor to bail out the banks and give insurers windfalls so they will finance the politicians who thought this deviousness up.
REMEMBER, when you can't figure out WHY we are waiting until 2012 for the "Health Care Reform" to start, THIS IS WHY! OBAMA & CO WILL CLAIM they are financial geniuses to have found a way to finance the health care bill as they promised to do.
EVERY SENIOR CITIZEN NOW ON SOCIAL SECURITY WILL BE PAYING $500 every year - PER PERSON. This is from the administration' holding back two years of our legally assigned Cost of Living Increases so our social security income every year starting from 2012 will be $500 less per year than it should be.
I AM FURIOUS AND FRUSTRATED! I've passed my tolerance long ago.
SOMETHING MUST BE DONE TO STOP THIS RAPE OF AMERICAN CITIZENS BY THEIR GOVERNMENT
10-15-2009 @ 11:20AM
sherry said...
I couldn't agree with you more....soon it will be cat food for me, and I'm not kidding!
10-15-2009 @ 11:21AM
Joe said...
Why are you angry at people who were smart enough and persistent enough to save for their retirement? You had the same opportunity as anyone else. But like the grasshopper, you probably lived for the moment and expected someone else to take care of you later on. I bet you voted for hope and change last year didn't you? Well, how's that hope and change working out for you now?
10-15-2009 @ 12:15PM
jac kie said...
I AGREE. MY HUSBAND AND I CAN HARDLY MAKE IT ON SS. HE WORKED FOR 38 YEARS IN A PLACE WHERE THEY HAD NO RETIRMENT .MY RETIRMENT PAYS FOR INSURANCE. WHY HAVE WE WORKED ALL THOSE YEARS AND END UP GOING TO FOODBANK LIKE THE PEOPLE THAT DON'T WORK
10-15-2009 @ 12:23PM
train said...
Pay attention.......Congress has exempted themselves from the retirement and healthcare laws. As long as we, the public taxpayer, allows that we deserve what we get. What foolishness!! Why should the lawmakers be exempt from the NATIONAL financial requirements they inflict on us. This is third world dictator stuff that has nothing to do with the presidency. It's the CONGRESS people! Tell your congressman (and particularly your Senators) tht they must be included in any law. If they don't listen to you and you vote for them again........you have nothing to say. You've done what those congressmen count on you to do, ignore the facts.
10-15-2009 @ 12:37PM
mark ferguson said...
are you jealous or wat?
10-15-2009 @ 12:41PM
brandi3883 said...
Rich people who don't need it? You pay into SS so you will have it later in life. It isn't we all pay into SS for other people. I worked really hard, made a lot of hard and smart choices and now I have a good paying job. I pay sooo much in SS every paycheck and I am looking forward to getting it back some day.
10-15-2009 @ 1:27PM
aceequestrian said...
You should have planned early in your working time to save money for your retirement. Social Security was never intended to be the sole amount people use to live on. Don't begrudge people who have money - some of them planned better than you did and some were fortunate to inherit theirs.
10-15-2009 @ 6:40PM
Angelica Hunt said...
It's so simple...Our own government is stabbing the American people in the back...the ones who have enabled a "WORLD ECONOMY", (those who have worked their fingers to the bone) are now chosen to TAKE THE HIT so as the WORLD UNION may be perfectly formed. Yes, AMERICA we are chosen not to fight on battlefields any longer and sacrifice our sons and daughters...no, no...NO! We have been chosen by all of those betrayers in WASHINGTON to give up our very sustenance of FOOD, CLOTHING, HOUSING and HEALTH CARE so other NATIONS can enter our domain. WE worked for it...BUT NOW WE MUST SHARE THIS WEALTH...NOT BY CHARITY...although we've done more than our share of that already!!!!!!! BUT, we must stand still while we feel the knife of our own government stabbing us in the back. However, PRIDE GOES BEFORE THE GREAT FALL. Those who are constructing this monster plan will FALL. Implode is the word. You can only blow up a balloon so far with hot air. Your plan is self defeating...and cannot survive off the fantasies of someone's GREED to be in CONTROL of all things. REMEMBER How Hitler imploded...The end is already obvious.