Fuel Prices Down, Food Prices Slow to Follow
Washington--The U.S. Department of Agriculture says after two years of record breaking fuel prices, prices have dropped but food costs are not dropping nearly as fast. But for the first time spiraling, food costs have leveled off.
That's good news for shoppers, who have abandoned fast food outlets and upscale restaurants in droves. Studies show that many people are cooking at home to save money, because of the worsening U.S. economy.
In the latest food price outlook the USDA's Economic Research Service has connected flat grocery prices with significant drops in commodities payouts to U.S. food producers.
The rise and fall of wheat prices stands as a prime example of what’s happening across U.S. commodity markets. Earlier this year wheat prices fetched double digit records in March 2008 but finished the year at just above the break-even point. Butcher shop prices for beef dropped because shoppers started looking for cheaper substitutes.
While climbing food prices have stopped cold in 2009, prices are expected to stay at the high inflationary levels according to USDA economic analyst Ephraim Leibtag.
"Overall, food prices are still quite a bit higher than they were three years ago, and that's not going to change," Leibtag said.
According to the American Farm Bureau’s year-end market survey, cereals and baked goods jumped 9 percent or more in 2008. Falling grain prices means bread prices will go up just 3 percent or less in 2009. Eggs, which went from $1.21 per dozen in 2006 to nearly $2 in 2008, should drop by a few cents this coming year.
Dairy products should fall after significant markups in 2008. The price for a gallon of milk is already down in Boise, Twin Falls and Pocatello but shouldn't’t drop further because prices are still being influenced by the midyear markup in fuel as well as commodity costs, which stayed high in September.
The Farm Bureau in Washington also says that retail prices driven up by fuel costs have stayed at those prices despite significant falling fuel prices nationwide. The market basket surveys noted price drops in apples, cheese, beef, bacon but cereal and bread were up along with mayonnaise.
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