On Wednesday, the U.S. Labor Department reported that wholesale food prices jumped 3.9% in February over January, the highest monthly increase in 37 years, according to a report in the Los Angeles Times. Economists expect to see a similar uptick in what consumers are paying for food at retail when the Labor Department [image-nocss] releases its consumer price index Thursday.
"Food prices have been rising a lot faster, because underlying costs have really shot up. You're seeing some ingredients up 40%, 50%, 60% over last year," Ephraim Leibtag, a U.S. Department of Agriculture economist, told the newspaper. "When you see wheat prices close to 80% up, that's going to ripple out to the public."
Economists warn that such prices will probably remain high this year and possibly much longer, driven by a confluence of factors: the fall of the U.S. dollar, slowing growth in crop yields, political unrest in the Middle East, high crude oil prices and a revived interest in crop-based biofuels. Violent weather patterns are compounding the problem.
U.S. consumers spend only about 10% of their annual income on food, yet Americans are already flinching at the gas pumps and at the market checkout stand. The USDA has projected that food prices will rise 3% to 4% this year.
Produce prices are rising sharply. So is the price of orange juice. This month, PepsiCo said it was raising prices for its Tropicana juices by as much as 8% after record cold temperatures chilled this season's citrus crop in Florida. Rival Coca-Cola Co. had already raised prices on its Minute Maid line.
Some of the biggest increases are expected in the meat section, as livestock feed prices have doubled in the last year, Leibtag said. McDonald's Corp. has warned that it might charge more for Big Macs and other items. Meat producer Smithfield Foods Inc. recently cautioned that consumers will be paying more for bacon, chops and ribs during this summer's barbecue season.
"Retailers understand there will be more price pressure," Smithfield Foods Chief Executive C. Larry Pope said during the company's recent earnings call with analysts.
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