Iowa Public Television

 

Food Costs Not Rising As Fast As Projected

posted on August 23, 2013


Some economic indicators are pointing to growth in the second half of this year but other sources tell a different story.

According to the Conference Board, the index of Leading Economic Indicators rose 0.6 percent in July. The figures indicate there will be job and economic growth over the next six months.

Despite the encouraging news, the Labor Department recorded higher unemployment levels in 28 of the 50 states last month. Nevada, home of a large number of service sector jobs, saw unemployment climb to 9.5 percent as the nation’s rate fell to 7.4 percent.

The Federal Reserve Board released its July meeting minutes this week revealing Fed members feel the time is fast approaching to slow down bond purchases. 

The news pushed average rates for fixed mortgages to their highest level in two years.

Wall Street also was unhappy by the notion of bond purchase curtailment and the Dow Jones Industrial Average spent the week moving downward.

According to USDA, the price of raising a child took a jump of nearly 3 percent last year.  Federal officials say it will cost more than $300,000 over the next 17 years for food, shelter, and other necessities associated with child-rearing.  And in the near-future, getting a bite to eat is predicted to take a bigger bite out of your wallet.

The Department of Agriculture’s latest numbers indicate that the price of food will not increase as much as earlier projected.  USDA expects food prices to rise only one and a half to two and half percent which is half of what government officials had previously predicted. USDA economist Ricky Volpe says a number of factors have contributed to the less than anticipated increase.

 Ricky Volpe, Economist, USDA Economic Research Service: “We were initially looking at three to four percent increase, which was above average. That was before we knew that we were going to have these lower fuel prices, and the strengthening U-S dollar, the overall improvement in the economy. We are still looking at some food prices that are going to go up a little bit more than average and some that will go up less than average. But on the whole we are looking at moderate food price inflation for the year, which is good news especially given the initial outlook we had when the drought broke in July and August of 2012.”

One of the places last year’s drought had a big impact was on the price of beef.  Decreased corn and soybean yields lead to higher grain prices.  The higher feed costs forced farmers and ranchers to cull their herds which created a short term glut but over time the smaller supply has pushed prices higher at the meat counter.  While beef prices won’t be increasing as much as originally expected the cost of beef will remain high.

Ricky Volpe, Economist, USDA Economic Research Service: “We’re now looking at beef prices to increase between two and three percent on the year. But I should note that many beef prices have reached record or near record levels across supermarkets in the U.S. So inflation for the beef category may be small in percentage terms, but it’s not as if consumers are seeing any relief there.”

Volpe says consumers also can expect to see an increase of two the three percent “if not more” for eggs as well as a three to four percent rise in the price of poultry.  However, according to Volpe, consumers will see their dollar will go further in the dairy aisle. 

Ricky Volpe, Economist, USDA Economic Research Service:  “We were initially forecasting pretty strong price increases for the year 2013. But it turns out we saw most of the impacts of the drought at the tail end of 2012. So we’re now on track for very moderate price increases for dairy for the foreseeable future.

 


Tags: food food prices Rick Volpe USDA