990271 U.S. Official Sees Food Prices Up 3% in 1999

Washington - U.S. food prices could rise by as much as three percent in 1999, due in part to soaring prices for oranges after a cold snap that devastated the California crop, a government economist said.

A 3% increase in food prices would be the biggest rise since 1996, but still would not push the overall rate of inflation in the U.S. economy beyond expected levels, said Agriculture Department economist Annette Clauson.

Food prices rose 2.2% last year, the smallest increase in five years, according to the government's main inflation gauge, the Consumer Price Index.

Clauson said California orange prices are expected to leap 50% in the first six months of 1999 because of the freeze, she said. A major question is whether high orange prices will continue into the autumn and winter months.

Also affecting retail food prices will be a jump in banana prices throughout 1999 caused by deadly Hurricane Mitch which blew through Central America last autumn, Clauson said. Banana prices should peak in April.

U.S. dairy production, which was unable to keep up with demand for gourmet ice cream and cheese during the past year, may have another year of tight supplies that contribute to overall higher prices, she said.

But prices could rise by a more moderate level of about two percent in 1999 if the sluggish export market for U.S. beef and pork pushes down retail prices for meat, Clauson said in remarks prepared for the USDA's annual agricultural outlook conference.

“Continued record large supplies of competing meats at even lower prices relative to beef will hold down large retail price increases,” she said. “However, as supplies decline, retail beef prices will begin rising modestly in spring 1999.”

Together, those food categories account for more than one-third of the price index based on foods eaten at home, which is a component of the Consumer Price Index.

Clauson said the price of food at home would increase between two and 2.5% this year, up from 2.2% in 1998.

Clauson also said consumers will continue a long-time trend of eating more of their food outside the home. She said the price of food away from home would rise 2.5 to three percent in 1999, up from 2.6% last year.

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