Consumers Paying More for Food—Experts Cite Fuel, Commodity Prices
WACO, Texas, April 7, 2011 /PRNewswire-USNewswire/ -- Consumers could pay 3-4 percent more for food this year, according to the Consumer Price Index (CPI), and experts count a sharp rise in fuel costs as the leading factor.
"Especially for fresh agricultural goods, time to market is essential. It's not like you can watch the price of diesel and transport your goods accordingly," said Bruce Bullock, director of the Maguire Energy Institute at Southern Methodist University. "You are held hostage to those costs."
Fuel prices are a major component of food production, as nearly half of retail food price increases (44 percent) come from fuel, transportation and energy costs. Raw farm products contribute less than a third (29 percent).
Rising fuel prices affect every stop in the production chain. Farmers and ranchers are paying more for basic inputs like diesel and fertilizers. Manufacturing and processing facilities also must account for higher fuel costs.
"As those prices go up, it costs more money just to get the food product to the grocery store shelf. The farmers' and ranchers' share of that consumer dollar is very small," said Central Texas cattle rancher Lloyd Huggins. "The rest of that cost is going to the people who take the raw product and turn it into something consumers really want to eat."
Commodity prices also have been increasing, due to growing global demand and recent supply disruptions. However, processed foods are most likely to post noticeable increases.
"We'd expect to see goods with a higher degree of processing to them to go up faster than a five-pound bag of flour," said Jim Sartwelle, Texas Farm Bureau director of Public Policy. "Those products have more processing, transportation and marketing costs."
Ultimately, food prices are expected to level out, and consumers likely will pay slight increases over the long term.
Video, audio and print resources regarding rising food prices may be found at Texas Farm Bureau's new consumer website: http://tabletop.texasfarmbureau.com.
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SOURCE Texas Farm Bureau