Tuesday, March 11, 2008

Grocery prices / Inflation about to hit your wallet!


Key Points from the article:

U.S. retail chicken prices in January were up 10 percent compared with a year before, while whole milk was up at least 20 percent and tomatoes 25 percent, according to the Bureau of Labor statistics.

Bread was up 5.4 percent nationally. Skyrocketing wheat prices mean higher flour prices, which means everything from pizza crust to cake are likely to see a price hike in the coming months.
And that side of egg salad? Not cheap. Eggs gained more than 30 percent.

Food accounts for about 13 percent of household spending, compared with about 4 percent for gas.

Food prices are rising while home values fall and the stock market falters – all of which can shake consumer confidence.

Wholesale food prices, an indicator of where supermarket prices are headed, rose last month at the fastest rate since 2003, with egg prices jumping 60 percent from a year ago, pasta products 30 percent and fruits and vegetables 20 percent, according to the Labor Department.

A whole shopping basket of factors are combining to make a trip to the market more costly.
Higher fuel prices make it costlier to grow crops and get them to market. Corn, a key foodstuff for farm animals, has shot up as ethanol demand increases. Corn prices have more than doubled in commodity markets over two years, and soybeans nearly tripled, according to DTN, a commodities-analysis firm in Omaha, Neb.

"The biggest factors have to do with the ever-increasing demand for food products combined with the weak dollar," Mr. Leibtag said.

In 2005, wheat averaged $3.50 to $4 per bushel on commodities markets, he said. By December, the price was $7.75, and in January it was $8.55. Futures markets predict a further increase.

Corn inflation has translated to higher meat prices.

Bottom Line is that the consumer, while starting to get worried, has really ignored this impact so far. Reporting on this topic has been SLIM TO NONE but it will really start to kick in sometime this spring/summer as inflation and gas prices keep prices climbing.

Dan Ross

No comments: