USDA Predicts Surging Food Prices in Coming Year

The USDA has released their projections for food price inflation in 2011/2012, showing troubling forecasts that may send you to the grocery store today, before paying higher prices tomorrow. The report shows that the Consumer Price Index (CPI) for all food increased 0.8 percent between 2009 and 2010, and is forecasted to increase 3.5 to 4.5 percent in 2011.

Items that are expected to inflate the most include beef, cooking oils, and seafood. Processed vegetables and beverages were projected to to see smaller changes in the CPI. The Wall Street Journal notes that “the midpoint of the new USDA outlook signals the sharpest acceleration in the food inflation rate from one year to the next since 1978, and makes the increase itself the biggest since 2008, when prices rose 5.5%.” While things may seem bleak for the rest of the year, the USDA projects that prices will rise only 2.5 percent next year.

The report also found that food-at-home prices increased 0.3 percent, the lowest annual increase since 1967, while food-away-from-home prices rose 1.3 percent in 2010. Total food expenditures for all food consumed in the U.S. were $1,240.4 billion in 2010, a 3.4-percent increase from $1,199.8 billion in 2009. Spending on food away from home accounted for 47.9 percent of total food expenditures in 2010; spending for food at home accounted for 52.1 percent.

Bloomberg Business Week notes that the Bureau of Labor Statistics earlier this month said consumer food costs rose 0.4 percent in September, capping a 12- month gain of 4.7 percent.

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Food Prices Rise to Near-Record as Inflation Accelerates

World food prices rose to near a record in April as grain costs advanced, adding pressure to inflation that is accelerating from Beijing to Brasilia and spurring central banks to raise interest rates.

An index of 55 commodities rose to 232.1 points from 231 points in March, the United Nations’ Rome-based Food and Agriculture Organization said in a report on its website today. The gauge climbed to an all-time high of 237.2 in February before dropping 2.6 percent in March.

The cost of living in the U.S. rose at its fastest pace since December 2009 in the 12 months ended in March, the same month in which Chinese consumer prices rose by the most since 2008. The European Central Bank raised interest rates on April 7, joining China, India, Poland and Sweden in a bid to control inflation partly blamed on food costs. Costlier food also contributed to riots across northern Africa and the Middle East that toppled leaders in Egypt and Tunisia this year.

“There seems to be some easing for a lot of commodities, but whether this is demand rationing, we have to wait and see,” Abdolreza Abbassian, a senior economist at the FAO, said before the report. “If the weather is good, if plantings expand, I think we could see some relief in food prices.”

Read more here.

New ag reports point to inflation in food prices

Fresh on the heels over the debate of whether and when inflation hit food prices, the Department of Agriculture warned yesterday that, well, inflation will hit food prices — and hard. Projected crop yields, combined with production issues and higher demand in Asia, have put food commodities in an “alarming” position, according to analysts. That’s good news for farmers, and bad news for just about everybody else:

The agriculture department on Tuesday cut estimates of US corn yields for a third successive month, forecast record soyabean exports to China and warned of the slimmest cotton stocks since 1925. …

Benchmark Chicago corn futures soared above $6 a bushel for the first time since August 2008, before ending lower. Soyabeans rose 4.3 per cent and New York cotton futures posted a record above $1.51 a pound. The price rises have revived fears of a repeat of the global food crisis of 2007-08.

In Europe, milling wheat surpassed a peak reached after Russia banned grain exports in August in response to a devastating drought.

Corn was a special concern. The staple crop’s projected yield has now been revised downward twice, and the bumper from this year has hit a 15-year low. One of the culprits in this shortage is ethanol production, which has again increased demand, taken more of the harvest, and raised prices. Those price impacts will be felt in direct costs to consumers for corn-based products, and also from beef prices influenced by the price of corn-based feed.

This report comes in the middle of a debate over the Federal Reserve’s plan for a second round of “quantitative easing,” which essentially prints money in order for the Fed to buy US debt through Treasury bonds. Sarah Palin warned that inflation had already hit grocery store prices, hitting American consumers in their pocketbooks for staple items, a claim at which the Wall Street Journal’s Sudeep Reddy scoffed while its editorial staff supported Palin. Reddy later rebutted criticism by writing that Palin had the time frame wrong and that inflation hadn’t occurred until very recently.

That, however, is irrelevant to the question of the Fed’s QE2 policy. With inflation on food on the rise now and Ag warning of even more inflationary pressures, the last thing American consumers need now — at least at the grocery store — is the prospect of artificial inflationary pressure being added by the Fed, with the backing of the Obama administration. Weakening the dollar and intentionally stoking inflation will erode the buying power of Americans during a long period of joblessness and underemployment, and the price increases will force consumers into buying less in the long run, not more, which will delay a recovery in the sector where the US most needs it, in consumer activit