01/13/09 Food price escalation

The government's Consumer Price Index (CPI) has recently released figures indicating that consumer prices in the general economy have declined by 1 ½% which is the second consecutive record decline. The CPI reports however that food has been rising at an accelerated rate in 2007 and 2008, and this trend is expected to continue into the first half of 2009. Retailers continue to pass on higher commodity and energy costs to consumers in the form of higher retail prices. U.S. Department of Agriculture economist Ephraim Leibtag comments: "Right now the year over year is 6% for all food and the food at home is slightly above that at 7% led by some of the categories we've been looking at all year&the cereal and bakery product prices that are up double digits year over year and certainly the fats and minerals category while meat products and dairy products have been declining as of late." The main factors behind higher food commodity costs include stronger global demand for food, increased U.S. agricultural exports resulting from stronger demand, a weaker dollar, weather-related production problems, and the increased use of some agricultural products such as corn for bio-energy uses.