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Higher food prices expected in 2011

posted on October 29, 2010

Much of the anti-incumbent sentiment targets controversial policy reforms, corporate bailouts and high unemployment. And it is becoming increasingly apparent that many Americans are growing weary with the pace of the economic recovery.

But for farmers, the recovery may already be well underway. Prices for corn, soybeans, wheat and cotton ALL are at contract, if not, all-time highs.

Amidst surging demand for exports, Class III milk futures touched a two-year high this week, while butter traded at its highest levels in five years.

And with the bull market showing no signs of a top, the Agriculture Department this week predicted higher food prices next year.

Higher food prices expected in 2011

The USDA's Consumer Price Index for Food issued this week predicts a higher grocery bill in 2011, with dairy goods and pork products leading the way. According to USDA, prices for "all foods" will rise 2 to 3 percent next year, almost double the amount originally forecast in 2010. Higher corn and soybean prices are seen as the main drivers of the increase. Even so, food costs are only expected to rise about half as much as in 2008, when all food prices rose more than 5 and 1/2 percent. The biggest spike in prices will likely be seen in the dairy case and at the meat counter, where pork products are forecast to rise between 3 and 4 percent. Overall meat prices, which include beef and veal, are expected to rise 2.5 to 3.5 per cent. A USDA economist projects the food forecast could rise again this year, if commodity prices remain at lofty levels, as current forecasts were not figured with the recent spike in the market. The largest increase projected in this week's report was noted in the dairy parlor, where prices were forecast to increase 5.5 percent in 2011. The gain is attributed mostly to strong exports. Class III Milk futures soared to two-year highs this week as cheese-makers and others tried to lock-in costs before a bigger price boom occurs next year.

Tags: bailouts corn dairy economy food meat news