May 19, 2014 - Blogs
Rising food commodity prices are challenging your wallet. Are you surprised by this?
I have been writing about rising commodity costs for the past few years, so I should have been prepared for yesterday’s sticker shock during my weekly trek to my local Safeway.
I found myself standing at the butcher’s counter wondering how in just one week—one week—the cost of chicken, beef and pork jumped enough to make me rethink our weekly dinner menu. The same thing happened in the fresh produce aisle. Lemons are now $1 a piece, limes 50 cents, and don’t get me started on the prices of oranges. Tasty, tender asparagus—one of our summer menu mainstays—is now $4.99 a pound.
In March, USDA predicted the food, food-at-home and food-away from home Consumer Price Indexes (CPIs) would increase 2.5% to 3.5% above levels in 2013, assuming normal weather conditions. The CPI for all food prices rose 1.4% last year. USDA predicted the cost of beef, poultry and eggs would likely spike due to severe weather and drought in much of the United States. Processed, shelf-stable food prices also were predicted to rise by 2% to 3% in 2014.
Drought conditions in California, a top vegetable and nut producer in the United States, would mean fewer of these products and an increase in prices from 5% up to 20%. The bitter winter that blanketed the nearly every state would cut deep into citrus production. Drought in Oklahoma only added to already low amounts of cattle, driving beef prices even higher, and the Porcine Epidemic Diarrhea Virus (PEDV) could also negatively impact pork prices this year.
That report was on the money according to two reports released last week by the U.S. Department of Labor’s Bureau of Labor Statistics. The Producer Price Index released on May 14 revealed food costs jumped 2.7 percent in April, the highest in more than three years, driven by an 8.4-percent increase in meat prices. On May 15, the Consumer Price Index (CPI) found April’s food index rose 0.4% for the third month in a row, as the index for meats rose sharply. The index for food at home, which rose 0.5% in both February and March, increased 0.4% in April.
The index for meats, poultry, fish, and eggs rose 1.5% in April and has increased 3.9% over the last three months. The index for meats rose 2.9%, its largest increase since November 2003. The index for fruits and vegetables also continued to rise, increasing 0.7%. The dairy index also rose in April; its 0.5% advance was its sixth increase in a row.
In contrast to the increases, the index for other food at home declined 0.2%, and the nonalcoholic beverages index declined for the fourth month in a row, falling 0.1%. The index for cereals and bakery products was unchanged in April.
The food-at-home index has risen 1.7% over the past 12 months, with the index for meats, poultry, fish, and eggs up 6.4% over the span, the largest increase among the major grocery store food groups. The index for food away from home rose 0.3% in April, the third straight such increase, and has increased 2.2% over the last 12 months.
So, what does this mean for the industry? It means consumers will be more attuned to prices and scrutinize quality. Food manufacturers will be tasked with finding a balance between rising production costs and shrinking profit margins, and the conundrum of whether to pass along those costs to the consumer in the form of price increases.
Rising food commodity prices are challenging your wallet. Are you surprised by this?
I have been writing about rising commodity costs for the past few years, so I should have been prepared for yesterday’s sticker shock during my weekly trek to my local Safeway.
I found myself standing at the butcher’s counter wondering how in just one week—one week—the cost of chicken, beef and pork jumped enough to make me rethink our weekly dinner menu. The same thing happened in the fresh produce aisle. Lemons are now $1 a piece, limes 50 cents, and don’t get me started on the prices of oranges. Tasty, tender asparagus—one of our summer menu mainstays—is now $4.99 a pound.
In March, USDA predicted the food, food-at-home and food-away from home Consumer Price Indexes (CPIs) would increase 2.5% to 3.5% above levels in 2013, assuming normal weather conditions. The CPI for all food prices rose 1.4% last year. USDA predicted the cost of beef, poultry and eggs would likely spike due to severe weather and drought in much of the United States. Processed, shelf-stable food prices also were predicted to rise by 2% to 3% in 2014.
Drought conditions in California, a top vegetable and nut producer in the United States, would mean fewer of these products and an increase in prices from 5% up to 20%. The bitter winter that blanketed the nearly every state would cut deep into citrus production. Drought in Oklahoma only added to already low amounts of cattle, driving beef prices even higher, and the Porcine Epidemic Diarrhea Virus (PEDV) could also negatively impact pork prices this year.
That report was on the money according to two reports released last week by the U.S. Department of Labor’s Bureau of Labor Statistics. The Producer Price Index released on May 14 revealed food costs jumped 2.7 percent in April, the highest in more than three years, driven by an 8.4-percent increase in meat prices. On May 15, the Consumer Price Index (CPI) found April’s food index rose 0.4% for the third month in a row, as the index for meats rose sharply. The index for food at home, which rose 0.5% in both February and March, increased 0.4% in April.
The index for meats, poultry, fish, and eggs rose 1.5% in April and has increased 3.9% over the last three months. The index for meats rose 2.9%, its largest increase since November 2003. The index for fruits and vegetables also continued to rise, increasing 0.7%. The dairy index also rose in April; its 0.5% advance was its sixth increase in a row.
In contrast to the increases, the index for other food at home declined 0.2%, and the nonalcoholic beverages index declined for the fourth month in a row, falling 0.1%. The index for cereals and bakery products was unchanged in April.
The food-at-home index has risen 1.7% over the past 12 months, with the index for meats, poultry, fish, and eggs up 6.4% over the span, the largest increase among the major grocery store food groups. The index for food away from home rose 0.3% in April, the third straight such increase, and has increased 2.2% over the last 12 months.
So, what does this mean for the industry? It means consumers will be more attuned to prices and scrutinize quality. Food manufacturers will be tasked with finding a balance between rising production costs and shrinking profit margins, and the conundrum of whether to pass along those costs to the consumer in the form of price increases.
No comments:
Post a Comment