FAQs about Food Price Increases

By Ethel Tiersky

Jan 23, 2013

Almost everyone is predicting that, in 2013, food prices in general will rise. Moreover, prognosticators are telling consumers which items will go up most. That useful information can help you devise coping mechanisms to keep your food costs in the area you can afford. Basically, smart shopping techniques, improved handling of products you bring home so that shelf life is extended, and some changes in food choices--all these should enable you to dine enjoyably within your budget. (Don't we all hate that word?)

Why haven't food price increases been very noticeable yet?

You may not have noticed grocery store price increases yet simply because prices didn't rise much (only 0.3% for retail food eaten at home) in 2012. The USDA reports that last year prices rose for beef and veal, poultry, fruit and some other foods but fell for pork, eggs, vegetables, and nonalcoholic beverages. Other food categories remained pretty much unchanged. But, you're wondering, what about the widespread drought, which, the media told us, would cause widespread price increases? As a result of the 2012 drought in the Midwest and Great Plains, corn yields zoomed downward to a 17-year low. The drought affected prices for corn and soybeans as well as other field crops, which should drive up retail food prices. However, the USDA explains, the transmission of commodity price changes into retail prices typically takes several months to occur. Therefore, most of the impact of the drought is expected to be realized in 2013.

The American Farmer Bureau Federation added this explanation for stable 2012 prices: "Throughout 2012, food prices were relatively stable, thanks to very slow but steady growth in the general economy coupled with fairly stable energy prices." However, the effects of the drought will be noticeable this year--and next.

Furthermore, meat prices did not rise in 2012 because ranchers sent more than the usual number of cattle to slaughter to avoid the expense of rising prices on animal feed. But the effect of this maneuver will be felt by consumers for a few years because a smaller supply of meat will eventually lead to higher prices in the retail stores.

How much of an increase can we expect in 2013?

On average, the USDA predicts food price increase of 2-4% in 2013. Similarly, the Farm Bureau expects prices to rise 3-4%, slightly higher than the rate of inflation.

According to Bill Lapp, president of Advanced Economic Solutions, "We are in a period of multiple years of food inflation being greater than general inflation."

Energy and transportation account for approximately 8.2¢ on every dollar, so the price of oil and the output of ethanol (which declined in 2012) will affect food prices; which way is tricky to predict.

To read our site's August 2012 article on food prices, go to "Drat that Drought! It's Raising Food Prices."

Which foods are likely to cost more?

The USDA says that inflation will remain strong for most animal-based food products, cereals, and bakery goods. Poultry prices will increase 4%, beef by 5%, and dairy products by 4.5%. Egg and poultry prices go up faster than cattle and hogs because they are produced and brought to market faster. It may take until 2014 before the cost of beef goes up.

What about produce prices? In 2012, they went down .5% because of generally calm weather in the places where they're grown. However, frost or drought can quickly cause shortages that send prices up.

In general, the projected picture of food costs isn't good news for consumers, but remember, things could always be worse. In Britain, the price of food has gone up by one-third since 2007.

Here are some specific edibles that are likely to cost you more in 2013:

apples: Blame the weather for the higher apple prices-- "a March warming spree followed by an April cold snap that killed off apple blossoms," the Chicago Tribune explained. As a result, last year's apple crop was the smallest since1986. Price hikes for apples and apple juice should be higher this winter.

maple syrup: Since 1980, maple syrup prices have climbed 182%, more than crude oil and gold, the Chicago Tribune points out. Why? It's quite labor-intensive to produce, and the technology hasn't kept pace with demand, Michael Farrell, a maple syrup researcher at Cornell University explains. Thank goodness there are faux syrups which taste like the real thing and cost a lot less.

milk and products containing milk: If the expired agriculture bill which provided certain protections to dairy farmers is not renewed or replaced, milk prices could zoom upward to $7 a gallon, and that could have a ripple effect on other commodities, according to Secretary of Agriculture Tom Vilsack. For advice on how to deal with this calamity, read the Shelf Life Advice piece entitled "Milk Prices Climbing? Here are Ways to Keep Your Costs Down."

tomatoes: American tomato growers have complained that imported Mexican tomatoes are so cheap (and so good) that U.S. tomato growers cannot compete with them. Mexican tomatoes are cheap because of a trade agreement which American growers have been insisting must change. We may not know until May 2013 what new deal the Commerce Department will make with Mexican growers. So far, a deal offering a 25% increase in the price of Mexican tomatoes has been rejected by American growers, so it's possible that the final agreement will stipulate a 30-40% increase, which will be felt by the average consumer and by restaurant owners.

What do our Shelf Life Advice Advisory Board scientists predict?

Three of the Shelf Life Advice Advisory Board scientists offer these insights, which illustrate how many factors affect food prices and how difficult it is to accurately predict which direction they'll move in.

Dr. Timothy Bowser, food process engineer:

I think they will continue to increase in the short-term for several reasons. Some foods prices will increase because of issues that affect the growing season, like the weather. For example, the drought in the Midwest will continue to drive up prices on beef, grain, and related food products. Insurance and health care costs are rising more quickly than inflation, and they are driving food prices up, too. The cost of most foods that require heavy labor for harvesting (many fruits and vegetables) and processing will go up due to the increasing cost and scarcity of labor. Finally, government-mandated food safety programs will also drive up the short-term price of food, but will also improve quality. In the long-term, I think food prices will stabilize and return to “normal” levels.

Dr. Clair Hicks, food scientist:

I think food prices will remain fairly flat because oil reserves are climbing. Fracking technology is doing the same for oil production as it did for gas production; the U.S. has become an exporter of petroleum. Gasoline prices will probably stabilize below $3.00, which will stabilize packaging prices, fertilizer, and other farm costs.

Dr. Catherine Cutter, food scientist:

I think much of the increase will depend upon supply and demand. The report on the full corn harvest hasn't been released yet, so we don't know exactly how much was harvested in 2012. Right now there's a glut of pork, so it appears that pork prices are down. Beef prices may also go down temporarily if more corn than usual comes to market. But it's difficult to make accurate predictions. One needs to consult an agricultural economist--or a crystal ball!

What can consumers do to keep their food costs down?

BE A SMART SHOPPER:

You've probably heard these suggestions before: read the newspaper ads consult supermarket apps, make a grocery list at home and stick to it in the store, don't shop when you're hungry, and try not to bring your children along to the grocery store. (They'll beg for all sorts of unhealthy items you don't need.) For more suggestions on shopping economically, check out this Shelf Life Advice article: "Supermarket Bargains You Can Find."

Investopedia.com has really gotten into this subject with an article entitled "22 Ways to Fight Food Prices." Here are just a few of the good ideas you'll find there and elsewhere:

Look down: Stores usually put the most expensive items at eye level.

Avoid the end caps: Those displays at the ends of aisles feature more expensive brands. Walk down the aisle to find a better deal.

Watch "best by" and "sell by" dates: Stores often lower prices on meat and other products when they're getting close to those so-called expiration dates.

Skip bottled water: If you don't trust the water from your faucet, buy a water filter.

To these Investopedia suggestions for cutting food bills, we must add these:

Buy less expensive foods. Make stew instead of steak. In recipes that call for ground beef, substitute brown lentils.

When you find a food bargain, buy some to eat now and some more to freeze.

Eat out less often, and, when you do, go where prices are reasonable and portions are generous, and take home any leftovers. Skip the coffee and generally overpriced desserts. Serve those at home.

Dr. Bowser and his family are taking a closer look at their food budget and planning their money-saving strategies: The most obvious and dramatic way to reduce cost is to eat out less. Another way is to reduce the amount of processed foods we purchase. For example, we pack up to four lunches per day at my house. Lunches often include processed snacks like granola bars and cookies. These can be replaced by homemade goods. The result will be healthier foods at a lower cost, and less waste (no commercial packaging). Gardening is another option, but we travel a lot in the summer after public school closes, so it is difficult. We may explore planting spring crops that do well in our region and will finish bearing before school is out.

WRAP AND STORE FOODS RIGHT TO EXTEND SHELF LIFE:

Some foods need air; others need to be protected from it. For example, berries and mushrooms need oxygen to keep them from getting moldy quickly, so there should be small holes in the wrapping. (Mushrooms also hold up well in a paper bag.) Foods going into the freezer should be double-wrapped or wrapped in freezer-weight plastic to avoid freezer burn. See these Shelf Life Advice articles for many more tips on proper handling to keep foods in good condition longer.

From Purchase to Storage, Tips on Extending Shelf Life

How to Wrap Foods for the Freezer

Everything You Need to Know about Wrapping Food Right

Have you noticed rising prices in your area of the country?

What suggestions do you have for dealing with higher food costs?

We welcome your comments.

Source(s):

Timothy J. Bowser, Ph.D. , Oklahoma State University, Dept. of Biosystems and Agricultural Engineering

Catherine N. Cutter, Ph.D., Pennsylvania State University, Dept. of Food Science

Clair L. Hicks, Ph.D., University of Kentucky, Dept. of Animal and Food Sciences

www.ers.usda.gov "Food Price Outlook, 2012-2013"

http://www.ers.usda.gov/data-products/food-price-outlook/summary-findings.aspx