Food prices continue to fall
October 28 2009
by Ron Sterk
KANSAS CITY — The aggregate value of the American Farm Bureau Federation’s third-quarter 16-item retail market basket survey declined for the fourth consecutive quarter, with prices for all comparable items below year-ago levels. The decline reflects the retreat of most commodity values and food ingredient prices from early and mid-2008 highs.
"Consumers continue to benefit from modest, steady declines in retail food prices at the grocery store," said Jim Sartwelle, A.F.B.F. economist. "Again this quarter and compared to one year ago, the foods that declined the most in average retail price are among the least-processed items in our market basket."
The A.F.B.F. survey showed a total value of $46.03 for the 16 items, down 26c from the second quarter of 2009 as lower prices for dairy products, vegetable oil and meat items more than offset higher prices for eggs, produce and grain-based items.
The change from a year ago was more significant with the latest market basket value down $4.18, or about 10%, from the third quarter of 2008, the A.F.B.F. said, after adjusting for a change from a year ago in 4 of the 16 items in the survey. The values for the same 12 items surveyed all declined from a year earlier, with the largest declines in whole milk, down 27%, potatoes, down 22%, apples, down 19%, shredded cheddar cheese, down 17%, eggs, down 16%, and vegetable oil, down 15%. Prices for comparable meat items ranged from 3% to 10% lower than a year ago and for grain-based products from 0.5% to 5% lower.
Weekly Food Business News ingredient prices and food and bakery ingredient indexes in early October reflected similar changes, with the exception of two items — sugar and cocoa powder — not included specifically in the A.F.B.F. survey that are bucking the downward trend.
Bulk refined sugar prices in the United States, which have held near 42c a lb for several weeks, were up about 10% from a year ago, mainly because of tight world supplies. Cocoa powder prices, ranging from $1.30 to $1.60 a lb depending on grade, were about 45% to 60% above year-ago values largely because of reduced production of cocoa butter resulting from lower demand for premium chocolate. As a result, the Food Business News milk chocolate bar index was up about 10% from last year.
But the other five food ingredient indexes were 7% to 55% lower, with the largest decline in the mayonnaise index, reflecting lower prices for two key ingredients — egg yolks and vegetable oil. Egg yolk prices were down more than 50% from last year. Bulk vegetable oil prices were down 7% to 50% from a year ago, although declines for the more commonly used oils were at the smaller end of the percentage range. Soybean oil was down about 10%, corn oil down 16% and canola oil 7% lower.
The Food Business News bakery ingredient indexes were up 26% to down 53% from a year ago, with the largest decline for pasta, reflecting the sharp decrease in durum and semolina values. The white pan bread index was down 11% from a year ago. In the A.F.B.F. survey a 20-oz loaf of white bread was $1.76, down 1c from the second quarter and down 3c, or 2%, from a year ago. For comparison, the price of white bread in September reported by the Bureau of Labor Statistics in its Consumer Price Index was $1.34 a lb, down 3% from both August 2009 and September 2008.
The lower food prices certainly reflect lower base commodity prices, but also take into account lower energy prices for processing and transportation, and consumers’ belt-tightening because of the uncertain economy.
The U.S. Department of Agriculture earlier in October forecast the largest ever U.S. soybean crop in 2009 with 2009-10 marketing year prices paid to farmers expected to average in a range of $8 to $10 a bu, down from $9.97 in 2008-09. The department forecast the second largest corn crop ever, with the price of corn forecast to range from $3.05 to $3.65 a bu, down from $4.06 in 2008-09. And although the U.S. 2009 wheat crop was forecast down 11% from 2008, the average price in 2009-10 was projected at $4.55 to $5.15 a bu, well below $6.78 in 2008-09.
If tracked regularly, the weekly ingredient prices and food indexes in Food Business News serve as a leading indicator for the quarterly A.F.B.F. survey and the monthly C.P.I. index. They also show food processors’ and retailers’ attempts to limit price volatility at the consumer level, even as prices fluctuate significantly from week to week.