Rising grain and energy prices push up US food bills
This morning, a bowl of cereal and milk probably cost 49 cents. Last year, it was 44 cents. By next year, it could be 56 cents.
By Agencies |
NEW YORK: This morning, a bowl of cereal and milk probably cost 49 cents. Last year, it was 44 cents. By next year, it could be 56 cents. It is enough to make you cry in your cornflakes. The forces behind the rise in US food prices — China’s economic boom, a growing biofuels industry and a weak dollar — are global and not letting up anytime soon. Grocery receipts are bulging because the raw ingredients, packaging and fuel that go into the price of foodstuffs cost more than they have in decades.
It is the worst bout of food inflation since 1990, but not yet worrisome to the US economy, said John Lonski, chief economist of Moody’s Investor Service. While high food prices can cut into consumers’ discretionary spending, the 4% rate of food inflation is still far below the crippling double-digit levels of the 1970s. Still, US consumers anxious for relief in the checkout line may have to keep waiting.
Andrea Williams, 32, can track the rise in prices of the food she buys for herself, her husband and their three children by looking back at the receipts she says she meticulously saves. “In 2004, I bought a gallon of milk, it was at $1.63,” Williams said before heading into a Wal-Mart in Savoy, Illinois. A gallon of milk cost nearly $3 in the past month in her area. A couple of years ago, Williams would spend about $250 a month on one big grocery trip. Now she says she is spending $250 on big trips every two weeks.
It is possible to trace the jump in food costs to the commodities markets, where the price of agriculture products and energy have reached multidecade highs this year. Crude oil, which helps dictate the price of gasoline and plastic packaging, hit an all-time peak in September.
Wheat prices also climbed to a record. China is the juggernaut. Rapid growth there — and in Brazil, Russia, India and other developing nations — has led to massive demand for raw materials, including energy to run factories and cars, metals to build infrastructure and beans and grains to feed livestock and people.
China’s oilseed demand reflects another trend: The world is using more of its food supply to make fuel. Corn in the US and China is being converted to ethanol, a gasoline additive. Europe is using more wheat for ethanol and rapeseed for biodiesel, a cleaner burning fuel that is mixed with regular diesel. Brazil has bulked up its production of sugarcane to make ethanol.
Or witness the wheat market. A failed crop in the Ukraine helped started the price rise in the US. The situation snowballed as one wheat crop after another worldwide was damaged by either too much rain or too little, leaving foreign buyers frantic to stock their shelves. Global stockpiles have dwindled to a 26-year low and sent prices surging higher.
It is the worst bout of food inflation since 1990, but not yet worrisome to the US economy, said John Lonski, chief economist of Moody’s Investor Service. While high food prices can cut into consumers’ discretionary spending, the 4% rate of food inflation is still far below the crippling double-digit levels of the 1970s. Still, US consumers anxious for relief in the checkout line may have to keep waiting.
Andrea Williams, 32, can track the rise in prices of the food she buys for herself, her husband and their three children by looking back at the receipts she says she meticulously saves. “In 2004, I bought a gallon of milk, it was at $1.63,” Williams said before heading into a Wal-Mart in Savoy, Illinois. A gallon of milk cost nearly $3 in the past month in her area. A couple of years ago, Williams would spend about $250 a month on one big grocery trip. Now she says she is spending $250 on big trips every two weeks.
It is possible to trace the jump in food costs to the commodities markets, where the price of agriculture products and energy have reached multidecade highs this year. Crude oil, which helps dictate the price of gasoline and plastic packaging, hit an all-time peak in September.
Wheat prices also climbed to a record. China is the juggernaut. Rapid growth there — and in Brazil, Russia, India and other developing nations — has led to massive demand for raw materials, including energy to run factories and cars, metals to build infrastructure and beans and grains to feed livestock and people.
China’s oilseed demand reflects another trend: The world is using more of its food supply to make fuel. Corn in the US and China is being converted to ethanol, a gasoline additive. Europe is using more wheat for ethanol and rapeseed for biodiesel, a cleaner burning fuel that is mixed with regular diesel. Brazil has bulked up its production of sugarcane to make ethanol.
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Or witness the wheat market. A failed crop in the Ukraine helped started the price rise in the US. The situation snowballed as one wheat crop after another worldwide was damaged by either too much rain or too little, leaving foreign buyers frantic to stock their shelves. Global stockpiles have dwindled to a 26-year low and sent prices surging higher.
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