U.S. consumers can expect to pay 4 percent to 5 percent more for food by year’s end compared to 2009, largely due to higher costs for beef, dairy and pork, says Bill Lapp, economist and president of Advanced Economic Solutions.
"We have beef, pork and dairy prices all increasing substantially since December, in the area of roughly 10 percent," Lapp told attendees of this week’s Reuters Food and Agriculture Summit. "Because food manufacturers and restaurants tend not to be philanthropic organizations, they are going to pass those costs on to their consumers."
As a result, Lapp predicts as much as a 5 percent rise in food prices by December. Food inflation, like overall inflation, has been tame for the past few months, but it should gain traction as the year proceeds, Lapp says.
Higher meat prices are due as cattle and pork producers reduce herds after multiple years of losses. That will mean less beef and pork. USDA estimates 2010 U.S. beef production will be down 1.3 percent from 2009 and pork production down 2.5 percent.
Milk production this year may be similar to 2009's level, but USDA estimates wholesale milk prices will move up 21 percent to 26 percent this year, with cheese prices up 16 percent to 20 percent. Analysts attribute those increases to less cheese production and stronger dairy product exports.
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