040931 Prices for Food Staples Rising Fast

Sacramento, CA - Have you poured a glass of milk lately? Barbecued a steak? Scrambled an egg for breakfast? If so, you've probably noticed: It costs more to eat these days.

Over the past several months, the cost of food for consumers has risen at a faster clip than we've seen since 1990. Last week's Consumer Price Index indicated that the trend eased a bit in August, but overall food costs still are climbing steadily.

According to economists, the nation has just come through an unusual stretch in which at least a half-dozen major commodities - eggs, milk, beef, poultry, corn and soybeans - have shown sizable price increases thanks to factors ranging from the weather to the low-carbohydrate diet craze.

"Basically, what you had was an almost perfect storm," said Bob Young, chief economist with the American Farm Bureau Federation. "All the major commodities rose, and it just rattled through the system."

In every case, the simple but powerful economic dynamics of supply and demand were at work, he said.

Bad weather and growing global demand pushed up soybean prices over the spring, following a jump in corn prices. That meant it cost more to feed livestock, and also pushed up the prices for two essential and ubiquitous food ingredients: soybean oil and corn syrup.

At the same time, farmers had trimmed flocks and herds. Beef cattle herds shrank because of droughts on the Western range. Milk cow herds dwindled after some farmers couldn't get replacements from Canada because of the mad cow disease scare, and others slaughtered milk cows to cash in on rising beef prices. Poultry flocks, once so numerous the market was flooded with eggs, were reduced by financially struggling farmers.

Suddenly, there was less red meat, poultry, milk and eggs to go around - just as the Atkins diet and low-carb craze hit America. People wanted beef, chicken, eggs and cheese like never before.

And how they have paid for it.

Milk prices in June were 27% higher than in the year before. Beef steaks cost 20% more this summer than they did a year ago. And the retail price of eggs in the spring ran about 30% more than last year.

The Consumer Price Index measures the average change in the price urban consumers pay for a "market basket" of goods and services, ranging from food to housing to education.

Since 1990, overall prices for food eaten at home and away from home have climbed about 40%, according to the index. That's an average of about 2.5% a year, in keeping with the modest inflation rate Americans enjoyed during that stretch.

In the past two years, the annual increase has been smaller: 1.8% in 2002 and 2.2% in 2003. But this year, the pace picked up and is on track to come close to a 4% annual increase. That compares with the current 1.7% annual increase for consumer items other than fuel and food, what economists call the core rate of inflation.

That's the zippiest pace for food price increases since 1990, when they rose 5.8%.

RETURN TO HOME PAGE

E-mail: sflanagan@sprintmail.com