Story URL: http://news.medill.northwestern.edu/chicago/news.aspx?id=153867
Story Retrieval Date: 5/20/2013 4:58:43 PM CST
“I guess I’ll just have to watch for sales more often than not,” said Lake View resident Tom Hargrove, 25, as he headed home with bags full of groceries this week. “I’m not surprised, but I didn’t expect it.”
But some people were surprised, and not very happy about it.
“I’m very shocked,” said Lynn Werner, 68, of Lincoln Park. “That’s crazy.”
“I’m retired, so I don’t feel like it’s necessary to have all the increases,” Werner said. “I’d have to cut back on my food budget.”
Experts say reduced supply and recovery from the recession are the driving forces behind the expected increases.
“The whole livestock industry – pork, chickens, turkey, cattle – have all lost a lot of money,” said Ron Plain, professor of agricultural economics at the University of Missouri. “There will be less milk, less beef, less chicken, less pork.”
Estimates of how much prices will increase vary, but the U.S. Department of Agriculture projects an overall increase in food prices from 3 to 4 percent, based on increases in supermarket prices of 2.5 to 3.5 percent, and increases in prices of food consumed away from home of 3.5 to 4.5 percent.
“With a re-emerging economy, we expect inflation to return to normal levels,” said Ephraim Leibtag, an economist with the agriculture department's Economic Research Service.
However, Plain predicts increases will be even higher – grocery meats at 5 percent and milk at 10 percent – as demand increases globally.
“Eating was fairly cheap last year,” Plain said. “Because of the recession, demand was down. But we are tightening up supply, and demand will probably pick up as the year progresses. The only thing that will stop it is if the recession keeps going.”
Declines in supermarket prices of fresh meats were considered a possibility when corn prices fell 7.1 percent last week in response to higher-than-expected production figures from the agriculture department.
“Chickens are nothing more than walking grain and hogs are grain on a hoof,” said Jeff Scoville, vice president of the Chicago-based Price Futures Group. “We may see lower food prices if there is more production based on the new grain prices.”
However, Plain said production is not likely to increase, and higher prices are inevitable.
The decision to reduce production spans back to 2008, when livestock farmers suffered historically high corn prices driven by demand for ethanol. Because of breeding cycles, production decisions impact consumers slowly – the time lags are awfully long for cattle (three years) and hogs (10 months), but shorter for poultry (approximately three months).
“Prices will move up as we move through 2010,” Plain said. “And they should still be higher in 2011. This is just the beginning.”