As average retail diesel fuel prices in California topped $5 a gallon this week, up 69% from a year ago, gains in food prices, though significant, seemed to pale. While prices for both energy and commodities are expected to moderate in coming months, it’s sometimes easy to overlook what a bargain food remains in the U.S.
Nearby crude oil futures prices in New York closed at $128.85 a barrel on May 27, down $4.32 from its peak of $133.17 on May 21 but more than double the year-ago price of $63.15.
The Associated Press in a May 24 story said the average price of a Memorial Day cookout in the U.S. was up 6% from a year ago, with the largest increase in the price of hamburger buns, which were up 17%. Mayonnaise was up 13%, chips 12%, tomatoes 9%, hot dogs 7% and beef 1%.
It cost even more to drive to the grocery story to buy those food items. The average price of gasoline in the U.S over the holiday weekend was $3.937 a gallon ($4.099 in California), up 23% from last year and the highest ever, according to the Energy Information Administration.
Meanwhile, as planting of the U.S. corn crop enters its final stages and harvest of the winter wheat crop is under way, grain prices are expected to moderate in coming weeks.
Analysts note corn futures prices typically peak between Memorial Day through the second week of June, or once planting is completed, and decline until after harvest. While the past couple of years have not been typical by any definition, it would appear more likely corn prices may trend lower the next few months rather than higher, assuming "normal" summer weather. Declining crude oil prices, which could dampen ethanol demand, may also add more downward pressure to corn prices.
The nearby (or continuous) corn futures price settled at $5.98 a bu on May 27, down from its high of $6.18¾ on May 8, but 64% above $2.33¼ a year ago.
Wheat futures prices have dropped dramatically since their highs earlier in the year as new crop harvest approached. The continuous hard red winter wheat future in Kansas City closed Tuesday at $8.05 a bu, down $5.32 from its Feb. 27 high of $13.37, but still 67% above $4.81 a year ago.
The latest Consumer Price Index from the U.S. Department of Labor shows the April index for Cereals and Cereal Products up 0.4% from March and up 7% from April 2007 while the Bakery Products index was up 2.1% from March and 8.6% from a year ago.
Despite rising prices, food remains a bargain to U.S. consumers as the full increase in raw commodity prices has not been passed on, unlike the oil industry, which seems much more willing to pass on raw material price increases.