Retail Food Prices Rise in Third Quarter

Listen to economist Jim Sartwelle comment about food prices in Newsline.

WASHINGTON, D.C., October 2, 2008 – Retail food prices at the supermarket increased in the third quarter of 2008, according to the latest American Farm Bureau Federation Marketbasket Survey. The informal survey shows the total cost of 16 basic grocery items in the third quarter of 2008 was $48.68, up about 4 percent or $2.01 from the second quarter of 2008.

Of the 16 items surveyed, 11 increased and five decreased in average price compared to the 2008 second-quarter survey. Compared to one year ago, the overall cost for the marketbasket items increased approximately 10.5 percent.

Potatoes, cheddar cheese and apples showed the largest retail price increases. A five-pound bag of potatoes was up 83 cents to $3.38; cheddar cheese was up 31 cents to $4.91 per pound; and apples rose 26 cents to $1.80 per pound.

Other items that increased in price were:  pork chops, up 22 cents to $3.62 per pound; vegetable oil, up 18 cents to $3.19 for a 32-oz. bottle; corn oil, up 15 cents to $3.63 for a 32-oz. bottle; sirloin tip roast, up 14 cents to $3.98 per pound; ground chuck, up 10 cents to $2.95 per pound; mayonnaise, up 8 cents to $3.27 for a 32-oz. jar; flour, up 5 cents to $2.62 for a 5-pound bag; and whole milk, up 4 cents to $3.92 per gallon.

We continue to see increases in several staple food items due primarily to the long-term effects of high energy prices in the food sector. Sustained high costs for processing, hauling and refrigerating food products are reverberating at the retail level,” said Jim Sartwelle, an AFBF economist.

Regarding the top gainer in this quarter’s survey Sartwelle explained, “Acreage planted to potatoes was down nearly 8 percent this year. The combination of a smaller crop and some production losses in the field has led to higher-priced spuds in the produce aisle.”

Apples prices tracked by Farm Bureau volunteer shoppers increased for the third consecutive quarter.

“The number of U.S. apple trees continues a long, slow decline which translates into less fruit for everything from processing to ‘pick-your-own’ to Mom’s apple pie,” said Sartwelle. “As a result, retail apple prices have crept higher.”

Large eggs decreased for the second consecutive quarter, down 11 cents to $1.71 per dozen. White bread also dropped 11 cents in the third quarter, to $1.79 for a 20-oz. loaf. Whole chicken fryers and bacon both dropped 6 cents per pound, to $1.43 and $3.51, respectively, while a 9-oz. box of toasted oat cereal decreased 1 cent, to $2.97.

The combination of increased summertime chicken production and lighter demand for chicken breasts resulted in a slight retail price decrease for whole fryers, according to AFBF.

As retail grocery prices have increased gradually, the share of the average food dollar that America’s farm and ranch families receive has dropped over time.

“In the mid-1970s, farmers received about one-third of consumer retail food expenditures for food eaten at home and away from home, on average. That figure has decreased steadily over time and is now just 19 percent, according to Agriculture Department statistics,” Sartwelle said.

Using the “food at home and away from home” percentage across-the-board, the farmer’s share of this quarter’s $48.68 marketbasket total would be $9.25.

AFBF, the nation’s largest general farm organization, conducts its informal quarterly marketbasket survey as a tool to reflect retail food price trends. According to USDA statistics, Americans spend just under 10 percent of their disposable income on food annually, the lowest average of any country in the world. A total of 74 volunteer shoppers in 32 states participated in the latest survey, conducted during August.

-30-

Sidebar: Tracking Milk and Egg Trends

For the third quarter of 2008, shoppers reported the average price for a half-gallon of regular whole milk was $2.57, up 19 cents from the prior quarter. The average price for one gallon of regular whole milk was $3.92, up 4 cents. Comparing per-quart prices, the retail price for whole milk sold in gallon containers was about 25 percent lower compared to half-gallon containers, a typical volume discount long employed by retailers.

The average price for a half-gallon of rBST-free milk was $3.44, up 10 cents from the last quarter and nearly 34 percent higher than the reported retail price for a half-gallon of regular milk ($2.57).

The average price for a half-gallon of organic milk was $3.71, up 4 cents compared to the third quarter and approximately 44 percent higher than the reported retail price for a half-gallon of regular milk ($2.57).

Compared to a year ago (third quarter of 2007), the retail price for regular milk in gallon containers decreased by one-half of 1 percent while regular milk in half-gallon containers increased 7 percent. The average retail price for rBST-free milk rose about 14 percent in a year’s time. The average retail price for organic milk in half-gallon containers went up steadily over the year and was 8 percent higher in the third quarter of 2008 compared to a year ago.

For the third quarter of 2008, the average price for one dozen regular eggs was $1.71, down 11 cents compared to the last quarter. The average price for “cage-free” eggs increased 5 cents to $3.00 per dozen, around 75 percent more per dozen than regular eggs.

Regular eggs increased in retail price by 13 percent between the third quarter of 2007 and the third quarter of 2008; “cage-free” eggs increased about 8 percent.

-30-