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March 18, 2013

Good News and Bad News on Consumer Costs

For more information on Newsline, contact: Kari Barbic, Media Specialist, American Farm Bureau Federation, karib@fb.org.

There’s pretty good news but also some bad news on prices for consumers. American Farm Bureau economist John Anderson explains what that means for food prices and farmers. AFBF’s Johnna Miller has that story.
Miller:The most recent Consumer Price Index report shows stable food prices for Americans.
Anderson:If you look at the Food at Home Index, which really measures the prices that people pay for the common items that they buy in a grocery store, that index was up just a little over 1 percent year over year. That’s a pretty low level. That’s actually below what we consider normal for food price inflation.
Miller:So that was the good news. But American Farm Bureau economist John Anderson says within the food sector there is a lot of variability.
Anderson:We still see beef and poultry prices increasing compared to most other items. Pork prices were down quite a bit as were cereal products, sweeteners and fats and oils. Beef prices continue to go up largely because supplies remain very tight and that has a lot to do with the drought we had last summer and actually for two summers, as far as the cattle industry are concerned, because a lot of our plains states had a terrible drought in 2011, actually probably worse than 2012. So those long run effects continue to affect the supply of meat that’s available and continue to put some pressure on prices. With poultry we seem to have very strong demand right now. Chicken tends to be a fairly low-priced protein option and so at a time when consumers are still very conscientious I’d say about the way they’re spending money, poultry demand tends to be pretty good and I think we’re seeing that. So even though they’re up, relative to a lot of other cooking choices consumers have, chicken is still pretty affordable and that helps its market. Pork has a slightly different situation I think than those two other products. We’ve had what was kind of a unexpected increase in pork production over the last couple of months. At the same time we’ve seen some concern about disruptions in some of our export markets that’s caused some concern about pork demand and so that has built a little bit of pressure on that market.
Miller:So, it’s time to stock up on pork chops. But now for the bad news.
Anderson:This is not exactly a newsflash to anybody who has filled up their gas tank lately. Gas prices have gone up quite a bit recently. I think the average retail price of gasoline in the U.S. is up 50 cents of so since the first of the year. That’s not an insignificant increase.
Miller:The most recent CPI report says the retail price of gasoline has gone up about 9 percent just from January to February. Anderson says if that lasts that could lead to higher food prices. In the short-term, it’s bad news for those who grow that food.
Anderson:It really affects farmers in two ways, both directly for what they’re having to spend for the fuel they buy and indirectly for the affect it has on the prices of the other inputs that are necessary. We’re getting close to the time of year when we are going to be using a lot of fuel. Planting is coming up here shortly in most of the country. How much do higher fuel costs influence what I’m having to pay for instance for fertilizer, because higher fuel costs drive up the cost for all of my input providers as well and some of that is going to be passed onto me.
Miller:Johnna Miller, Washington.
Miller:Newsline is updated Mondays and Thursdays by 5pm Eastern. Thank you for listening.

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