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USDA: Food prices won’t jump as much as in 2011
Michigan Correspondent

WASHINGTON, D.C. — Retail food prices are still going up, but not as much as they did last year; that’s according to a new USDA television feature published on YouTube and elsewhere.
It features Ricky Volpe, an economist at its Economic Research Service (ERS). “So, consumers should expect to pay a lot for groceries this year, but they shouldn’t expect prices to shoot up the way they did in 2011,” he said.

According to the USDA, last year grocery prices went up 6.4 percent. Volpe said this year prices will go up 2.5-3.5 percent.

“So that is more in line with what we’ve come to expect of normal price inflation over the last 20 years,” he stated.

Brian Todd, an analyst at the Food Institute – a trade association that’s considered to be independent – said “that’s where things usually fall.” The Food Institute represents both manufacturers and retailers.

According to the feature, beef and veal prices went up 10 percent last year and they will lead the increases this year. “Now here we are, and we’re still looking at another 4.5 percent, and that’s because of problems we’re having with low cattle inventory relative to demand both domestic and abroad,” Volpe said.

He added processed foods are now forecast to go up 3-4 percent. That’s a revision of an earlier prediction of 2-3 percent. So, are any foods supposed to go down in price? Volpe said yes: fresh produce and dairy products.

“Fluid milk went up a lot in 2011, but our outlook is for prices to be stable and even to start to come down a little bit towards the end of the year,” he stated. “We’re having great crops for most of our fruits and vegetables, so we are seeing some relief to inflation there. In fact, our outlook for fresh vegetables for 2012 is for prices to only go up about 1 percent.”

Todd said “things are looking good” for produce, but recent frost events in Michigan could affect prices of some fruits and vegetables.

Prices are not based solely on what happens at the producer level. Christine Cunnick, a spokeswoman for the National Grocers Assoc., said grocery store chains are “testy” about the subject of pricing. The stores set prices based on different marketing strategies, she said. Todd agreed.

“Food stores do have different pricing strategies,” he said. “Some pursue an ‘everyday’ pricing strategy, others have a ‘high-low’ strategy, which focuses on promotions.”

Todd added food prices have been going up more for retailers than for consumers. “Even though food prices are up from a year ago, wholesale prices are up even more,” he said. “Retailers are absorbing a lot of the increases. They’re sensitive to the consumer and also to competition.”

Walmart and Dollar Store outlets have been getting into the retail food business, and thereby increasing the competition. “Dollar Stores have been coming into the food space in a pretty big way,” Todd said.