Published on 01/24/01

Food Price Increases Hold Steady for 2001

The Consumer Price Index for all food increased 2.3 percent in 2000 and should rise about the same amount in 2001, say University of Georgia experts. After near-record growth last year, beef and pork price increases are expected to slow. Other food items should see only small increases.

"The slowing economy during the last quarter of 2000 is a forecast of a slower rate of economic growth during 2001," said Bill Thomas, an agricultural economist with the UGA College of Agricultural and Environmental Sciences.

"Because farm commodities account for only 20 cents of each retail food dollar, it's more important to look at what's happening in the rest of the economy than to focus on farm prices," Thomas said.

What's Driving Cost?


Americans can expect food prices to rise about 2 percent to 3 percent during 2001.
Higher energy prices last year won't necessarily translate into higher food prices, because transportation and energy costs are small components of the total food marketing bill.

"The total marketing bill equals 80 cents for every dollar consumers spend on food," Thomas said. "Transportation costs are 4 percent and energy costs 3.5 percent of the marketing bill. If energy costs continue to be this high through 2001, another 0.2 percent could be added to the rate of inflation in food."

Food price changes are a key to determining the portion of consumers' income that is spent on food. In 1999, consumers spent 10.4 percent of their household disposable income on food, with 6.2 percent for food at home and 4.2 percent for food away from home.

"During 2001, the long-run downward trend should continue, resulting in consumer expenditures for food amounting to only 10.3 percent of their income," Thomas said.

Item-by-item Cost

Thomas and other UGA economists make these forecasts for individual food sectors:

Meat Products: A booming economy continues to fuel demand for meat products, and overall meat prices were up 5.6 percent in 2000. Large meat supplies should limit gains to 3 percent to 4 percent in 2001.

Fish and seafood: Prices should climb 2 percent to 3 percent in 2001. A strong domestic economy is boosting sales in the restaurant and food-service sectors, which claim a growing share of total seafood sales.

Eggs: Prices will rise as much as 1 percent in 2001. Higher production levels and slower growth in exports have led to lower retail prices the past four years.

Dairy products: The CPI is expected to increase 1 percent to 2 percent in 2001. Strong consumer demand for gourmet ice cream, cheese and butterfat products, is expected to continue into 2001.

Fresh fruits: It's too early to know the full impact of the freezes in Florida on citrus prices. However, continued demand for fresh fruits and normal production levels for major fruits in the United States should boost the fresh-fruit CPI 2 percent to 3 percent in 2001.

Fresh vegetables: After low farm prices in 1999, farmers reduced acreage in 2000, and prices climbed. Farmers took note, and shipments are expected to decline during 2001. Assuming normal weather and continued strong demand, the fresh-vegetable CPI should increase 2 percent to 3 percent in 2001.

Processed fruits and vegetables: Adequate supplies of most fruits and vegetables for processing is expected to limit the CPI increase to 2 percent to 3 percent in 2001.

Sugar and sweets: Relatively low inflation, along with increased production and lower retail for selected sugar-related food items, is expected to limit the index increase to 1.5 percent to 2.5 percent in 2001.

Cereal and bakery: With grain prices lower this year and inflation-related processing costs modest, the CPI is forecast to rise 2 percent to 3 percent. Most of the costs to produce cereal and bread products -- more than 90 percent in most cases -- are for processing and marketing. Grain and other farm ingredients account for a fraction of the total cost.

Nonalcoholic beverages: The CPI is forecast to rise 2 percent to 3 percent. Prices of coffee and carbonated drinks, which account for 28 and 38 percent of the index, rose 3 percent (coffee) and 4 percent (soft drinks) in 2000. Recent near-record arabica bean production in Brazil should lead to larger U.S. stocks and continued moderate consumer prices.

Faith Peppers is the director of public affairs with the University of Georgia College of Agricultural and Environmental Sciences.