The cost of food can be tied to many things. The rising costs of production and transportation may affect food prices this year. In fact, the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri warned Congress to plan for tight supplies of basic farm commodities.
FAPRI said grocery store prices will be noticeably higher this year on items ranging from meat to cereal.
“We expect annual food price inflation in 2011 to be about 4.2%,” said Pat Westhoff, MU FAPRI director. “That is going to mean higher prices for pork, poultry, beef and a variety of other products. And that will be a big deal for people who have low incomes – who spend a lot of their income on food each year.”
The cost of energy could drive the inflation, according to Westhoff. While FAPRI prepared it’s baseline, crude oil jumped from $88 to more than $100 a barrel.
“We can expect a lot of volatility throughout the next decade in energy markets,” Westhoff said. “There is a very tight supply and demand situation in front of us as demand in China and other developing countries grows, and supplies of oil become more uncertain.”
China is driving an international increase in the demand for soybeans and other farm grains as well. FAPRI predicts corn will hit $5.32 a bushel this year. That price beats the 2007 record price by more than a dollar.
“These higher food prices are negative for most consumers,” Westhoff said. “But for farmers, it can be a major positive thing. We are looking at perhaps record level of farm income in 2011, nearing $100 billion for the first time.”
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