U.S. Retail Food Prices Up

WASHINGTON Jul 7/05 - MFB -- Retail prices for food at the supermarket rose about 2.5% in the second quarter of 2005, according to the latest American Farm Bureau Federation (AFBF) marketbasket survey. The informal survey shows the total cost of 16 basic grocery items in the 2005 second quarter was $40.51, an increase of 98 cents from the 2005 first quarter survey.

"The increase in retail food prices runs counter to what has been happening at the farm level, where the prices of many commodities, especially in the meat sector, have been declining," said AFBF senior economist Terry Francl.

He notes that according to an Agriculture Department report on May beef retail prices, both the farm-wholesale spread (an estimate of packer's margins) and the wholesale-retail spread increased. For pork, the May wholesale-retail spread was the largest since the low-hog price periods of 2002-2003.

"From this we can conclude that the bulk of the increase in retail prices is being pocketed after the commodities leave the farm," Francl said.

Despite the slight increase in average prices found by AFBF, Americans spend just 10% of their disposable income on food annually, the lowest average of any country in the world.

Of the 16 items surveyed, eight increased, seven decreased and one remained the same in average price compared to the 2005 first quarter survey.

Corn oil showed the largest increase, up 30 cents per 32-oz. bottle to $3, followed by center cut pork chops, which rose 25 cents per pound to $3.55. Whole fryers rose 22 cents per pound to $1.43.

Other items that increased in price:

- Vegetable oil, up 19 cents to $2.65 per 32-oz. bottle;

- Ground chuck, up 18 cents to $2.78 per pound;

- Cheddar cheese, up 12 cents per pound to $3.89;

- Sirloin tip roast, up 7 cents per pound to $3.83; and

- Whole milk, up 5 cents per gallon to $3.10.

"The higher cooking oil prices at the retail level reflect the upsurge in soybean oil prices that has occurred since last winter, when it became apparent the South American soybean crop was falling far short of expectations," said Francl. "Soybean-based products and related substitutes are higher than earlier anticipated and are continuing to climb. This reflects the risk associated with a potential outbreak of Asian soybean rust and weather uncertainties here in the United States."

Items that decreased in price from the second quarter of 2005 were: a dozen eggs, down 12 cents to 96 cents per dozen; toasted oat cereal, down 9 cents to $3.04 for a 10-oz. box; Russet potatoes, down 7 cents per 5-pound bag to $1.73; flour, down 5 cents per 5-pound bag to $1.63; apples, down 4 cents per pound to $1.09; mayonnaise, down 2 cents to $3.16 per 32-oz. jar; and white bread, down a penny to $1.42 per 20-oz. loaf. Bacon remained the same, at $3.25 per pound.

The share of the average food dollar that America's farm and ranch families receive has dropped over time, despite gradual increases in retail grocery prices.

"Thirty years ago farmers received about one-third of consumer retail food expenditures. That figure has been dropping steadily and now stands at only about 22%, according to Agriculture Department statistics," Francl said.

Using that percentage across-the-board, the farmer's share of this quarter's $40.51 marketbasket total would be $8.91.

AFBF, the nation's largest general farm organization, conducts its informal quarterly marketbasket survey as a tool to reflect retail food price trends. A total of 88 volunteer shoppers in 22 states, including Michigan, participated in this latest survey, conducted during the first half of May.

Copyright (c) 2005 Michigan Farm Bureau