U.S. Retail Food Prices Ease

LANSING - Apr 3/09 - MFB -- Retail food prices at the supermarket dropped slightly for the second consecutive quarter, according to the latest American Farm Bureau Federation (AFBF) Marketbasket Survey. The informal survey-newly updated to more accurately reflect consumer buying habits-shows the total cost of 16 food items that can be used to prepare a meal was $47.41, down about 5.5% or $2.80 from the fourth quarter of 2008.

Of the 16 items surveyed, 11 decreased and five increased in average price compared to the prior quarter. The overall cost of the marketbasket items in the first quarter dropped just under 1% compared to a year ago.

New this quarter, Farm Bureau has replaced pork chops, block cheddar cheese and whole chicken fryers with sliced deli ham, shredded cheddar cheese and chicken breasts-more contemporary forms of the original menu items. Mayonnaise and corn oil were also dropped from the menu list and replaced with orange juice and bagged salad as a reflection of today's health- and diet-conscious shoppers. While corn oil was dropped, vegetable oil, which can be made from a variety of crops including canola, soybeans and corn, remains one of the 16 marketbasket food items.

Bob Boehm, manager of the Michigan Farm Bureau Commodity and Marketing Department, said the marketbasket facelift was warranted, noting that AFBF made the switch knowing that some of the pre-chopped and partially prepared convenience foods come with higher price tags and had the potential to raise the total cost of the surveyed items.

"The prior menu was out of balance in that it concentrated on staple food products to stock a pantry from scratch. The updated menu tracks more closely with the way Americans currently shop for groceries as studied by the Food Marketing Institute," said Boehm.

Farm Bureau's volunteer shoppers have been gathering pricing data on the new marketbasket foods for the past year, beginning in the first quarter of 2008. So starting with this report, AFBF is able to provide year-to-year and quarter-to-quarter comparisons on the updated marketbasket of foods.

Shredded cheddar cheese, milk and vegetable oil showed the largest retail price declines and together account for most of the decrease in average price of the overall marketbasket. Shredded cheese dropped 70 cents to $4.24 per pound; milk dropped 67 cents to $3.15 per gallon; and vegetable oil dropped 38 cents to $2.79 for a 32-ounce bottle.

"Continued weak demand overseas for U.S. dairy products combined with increased on-farm production are behind the softening retail prices for shredded cheese and whole milk," said AFBF economist Jim Sartwelle.

Other items that decreased in price were: Russet potatoes, down 31 cents to $3.05 per bag; eggs, down 28 cents to $1.50 per dozen; toasted oat cereal, down 22 cents to $2.91 for a 9-ounce box; apples, down 16 cents to $1.35 per pound; boneless chicken breasts, down 12 cents to $3.38 per pound; bacon, down 11 cents to $3.26 per pound; white bread, down 11 cents to $1.77 for a 20-ounce loaf; and orange juice, down 2 cents to $3 for a half-gallon.

"The retail price decline for eggs is due to a combination of slightly higher production coupled with weakened demand as consumers respond to the economic downturn by curtailing spending in all areas. Industry analysts are predicting that slightly lower retail egg prices and relatively higher egg production will continue throughout 2009," Sartwelle said.

Five items increased slightly in price this quarter: ground chuck and sliced deli ham, up 8 cents to $2.94 and $4.94 per pound, respectively; sirloin tip roast and flour, up 5 cents to $3.99 per pound and $2.51 for a 5-pound bag, respectively; and American salad, up 2 cents to $2.63 for a 1-pound bag.

For the first quarter of 2009, shoppers reported the average price for a half-gallon of regular whole milk was $2.16, down 22 cents from the prior quarter. The average price for one gallon of regular whole milk was $3.15, down 67 cents. Comparing per-quart prices, the retail price for whole milk sold in gallon containers was about 25% lower compared to half-gallon containers, a typical volume discount long employed by retailers.

The average price for a half-gallon of rBST-free milk was $3.19, down 26 cents from the last quarter and nearly 50% higher than the reported retail price for a half-gallon of regular milk ($2.16).

The average price for a half-gallon of organic milk was $3.71, up 1 cent compared to the third quarter and approximately 70% higher than the reported retail price for a half-gallon of regular milk ($2.16).

Compared to a year ago (first quarter of 2008), the retail price for regular milk in gallon containers decreased by 17% while regular milk in half-gallon containers decreased 10%. The average retail price for rBST-free milk dropped about 3% in a year's time. The average retail price for organic milk in half-gallon containers went up and down slightly throughout the year, rising about 2% in the first quarter of 2009 compared to a year ago.

For the first quarter of 2009, the average price for one dozen regular eggs was $1.50. The average price for "cage-free" eggs was $2.93 per dozen, around 95% more per dozen than regular eggs.

Regular eggs and "cage-free" eggs dropped in retail price by about 30% and 2%, respectively, between the first quarter of 2008 and the first quarter of 2009.

According to the U.S. Department of Agriculture, Americans spend just under 10% of their disposable annual income on food, the lowest average of any country in the world.

As retail grocery prices have increased gradually over time, the share of the average food dollar that America's farm and ranch families receive has dropped.

"Starting in the mid-1970s, farmers received about one-third of consumer retail food expenditures for food eaten at home and away from home, on average. That figure has decreased steadily over time and is now just 19%, according to Agriculture Department statistics," Sartwelle said.

Using the "food at home and away from home" percentage across-the-board, the farmer's share of this quarter's $47.41 market basket would be $9.

Copyright (c) 2009 Michigan Farm Bureau