Food prices expected to increase in 2011

Monday, March 7, 2011 | 4:49 p.m. CST; updated 11:40 p.m. CST, Monday, March 7, 2011
The Food and Agricultural Policy Research Institute at MU projects a rise in food prices at the regular rate of inflation for 2012 and after.

COLUMBIA — Rising food prices could add about $178 to your grocery bill this year.

A combination of higher energy costs and increasing farming expenses will likely cause the price of food to rise at twice the normal rate of inflation for 2011.

Prices are expected to rise on all foods, but meat was expected to see the sharpest increase, according to the institute.

On average, the cost of food rises about 2 percent each year. In 2011, the institute predicts, food prices will increase 4.2 percent and meat prices will increase 6.3 percent.

These predictions are part of an annual report put out by agricultural economists from the University of Missouri. On Monday, representatives from the MU Food and Agricultural Policy Research Institute presented their forecasts to the U.S. Congress.

Food prices could be even higher than predicted as energy prices continue to increase. The research institute compiled the data in January. Since that time, conflicts in North Africa and the Middle East have contributed to a rise in oil prices.

“If we were doing a snapshot today, it might be even higher,” Pat Westhoff, director of the policy research institute, said on Monday.

High fuel prices not only increase production costs for farmers, they add to the shipping and storing expenses for products after they leave the farm.

Spending an extra 15 cents on a pound of ground beef might not grab shoppers’ immediate attention. Combined price increases, however, could cost Americans $67 billion extra over the year, according to the forecasts. That amount averages out to about $178 per person.

As prices rise, net farm income in 2011 was expected to reach $99 billion — a record high and approximately a 20 percent increase over 2010.

The quantity of major crops being planted this year was predicted to increase by 7.9 million acres, with the bulk of that increase in wheat and corn. The increases in farm income follow sharp dips in farm profitability during the recession.

In addition to fluctuating oil prices, variables such as weather can have unexpected effects on the success of crops and, therefore, the price of food.

“The reality is always going to be different,” Westhoff said.

The economists with the MU institute include some flexibility in the baseline report in order to compensate for weather that is too hot or too cold and spring seasons that are too wet or too dry.

“Once you correct for things like that," Westhoff said, the reports "do a pretty good job."

The main focus of this year’s baseline report is predictions for 2011, but the institute also includes predictions for the economic state of agriculture through 2020. After the price increases of 2011, the analysts expect food prices to settle down to the regular rate of inflation in 2012 and beyond.

After meeting with Congress and the U.S. Department of Agriculture this week, the institute will be presenting its report at the Missouri Agricultural Outlook Conference on March 14 at the Courtyard by Marriott, 3301 Lemone Industrial Blvd. The conference is at 8:30 a.m. and is free to the public.

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