The Consumer Price Index for all food
increased 2.3 percent in 2000 and should rise about the same
amount
in 2001, say University of Georgia experts. After near-record
growth last year, beef and pork price increases are expected to
slow. Other food items should see only small increases.
“The slowing economy during the last quarter of 2000 is a
forecast of a slower rate of economic growth during 2001,”
said Bill Thomas, an agricultural economist with the UGA College
of Agricultural and Environmental Sciences.
“Because farm commodities account for only 20 cents of each
retail food dollar, it’s more important to look at what’s
happening
in the rest of the economy than to focus on farm prices,”
Thomas said.
What’s Driving
Cost?
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about 2 percent to 3 percent during 2001. |
Higher energy prices last year won’t
necessarily
translate into higher food prices, because transportation and
energy costs are small components of the total food marketing
bill.
“The total marketing bill equals 80 cents for every dollar
consumers spend on food,” Thomas said. “Transportation
costs are 4 percent and energy costs 3.5 percent of the marketing
bill. If energy costs continue to be this high through 2001,
another
0.2 percent could be added to the rate of inflation in
food.”
Food price changes are a key to determining the portion of
consumers’
income that is spent on food. In 1999, consumers spent 10.4
percent
of their household disposable income on food, with 6.2 percent
for food at home and 4.2 percent for food away from home.
“During 2001, the long-run downward trend should continue,
resulting in consumer expenditures for food amounting to only
10.3 percent of their income,” Thomas said.
Item-by-item Cost
Thomas and other UGA economists make
these
forecasts for individual food sectors:
Meat Products: A booming economy continues to fuel demand
for meat
products, and overall meat prices were up 5.6 percent in 2000.
Large meat supplies should limit gains to 3 percent to 4 percent
in 2001.
Fish and seafood: Prices should climb 2 percent to 3
percent in
2001. A strong domestic economy is boosting sales in the
restaurant
and food-service sectors, which claim a growing share of total
seafood sales.
Eggs: Prices will rise as much as 1 percent in 2001.
Higher
production levels and slower growth in exports have led to lower
retail prices the past four years.
Dairy products: The CPI is expected to increase 1 percent
to 2 percent in 2001. Strong consumer demand for gourmet ice
cream,
cheese and butterfat products, is expected to continue into
2001.
Fresh fruits: It’s too early to know the full impact of
the freezes in Florida on citrus prices. However, continued
demand
for fresh fruits and normal production levels for major fruits
in the United States should boost the fresh-fruit CPI 2 percent
to 3 percent in 2001.
Fresh vegetables: After low farm prices in 1999, farmers
reduced acreage in 2000, and prices climbed. Farmers took note,
and shipments are expected to decline during 2001. Assuming
normal weather and continued strong demand, the fresh-vegetable
CPI should increase 2 percent to 3 percent in 2001.
Processed fruits and vegetables: Adequate supplies of most
fruits and vegetables for processing is expected to limit the
CPI increase to 2 percent to 3 percent in 2001.
Sugar and sweets: Relatively low inflation, along with
increased production and lower retail for selected sugar-related
food items, is expected to limit the index increase to 1.5
percent
to 2.5 percent in 2001.
Cereal and bakery: With grain prices lower this year and
inflation-related processing costs modest, the CPI is forecast
to rise 2 percent to 3 percent. Most of the costs to produce
cereal
and bread products — more than 90 percent in most cases — are
for processing and marketing. Grain and other farm ingredients
account for a fraction of the total cost.
Nonalcoholic beverages: The CPI is forecast to rise 2
percent
to 3 percent. Prices of coffee and carbonated drinks, which
account
for 28 and 38 percent of the index, rose 3 percent (coffee) and
4 percent (soft drinks) in 2000. Recent near-record arabica bean
production in Brazil should lead to larger U.S. stocks and
continued
moderate consumer prices.
