The U.S. Department of Agriculture had stated that consumers can expect to see a steady increase in food costs. The price of food is expected to rise as much as 4% in 2011, up from last month’s estimates of 2% to 3%, because of the soaring prices of farm products.
According to the USDA, the pace of food cost inflation has dramatically accelerated since 2008. Because of the increased cost of corn, the USDA has forecast a 6.5% rise the price of pork and a 4.5% rise in egg prices. Joe Glauber, a chief economist, stated that increased prices in both crops and livestock puts pressure on food prices as these costs work their way to consumers.
The USDA estimates that the supply of grain worldwide will suffer a 13% decline by the next harvest. Food shortages and fast-paced inflation in poor country has caused some unrest in parts of North Africa and the Middle East.
The United States is the world’s largest grower and exporter of corn, and the current estimations will jump to a record 13.73 billion bushels in 2011 as farmers plant more in an attempt to keep up with the rising demand. According to Glauber, this same rising demand will likely limit the stockpiles of grains. The expected inventories for 2011 is 675 million bushels and 865 million bushels in 2012.
Ephraim Leibtag, a USDA economist, stated that retailers are facing serious problems because they understand that people are still concerned about budgets, prices, and spending. According to Leibtag, prices are, at present, staying below 2008 levels because retailers are absorbing the price increases rather than passing them to their customers.
Two popular chains, Wal-Mart and Wegman’s Food Markets, have stated that they will be doing what they can to keep prices down. Wal-Mart stated that it will only increase prices when it is necessary, while Wegman’s says it will freeze prices on nearly 40 products during 2011.