What is in this article?:
- Global food prices pushed by three-factor engine
- Oil affecting food
- Grain shortages, Middle East turmoil and extreme weather in critical crop-producing regions have combined to send retail food prices higher this year.
- American consumers can expect to spend about 4 percent more for food this year than in 2010. Beef, pork and poultry products likely will see even greater price hikes, she said.
- U.S. food price inflation reached 7.5 percent in September 2008 before falling 10.5 percent by November 2009. It's been moving back up ever since.
Oil affecting food
Oil markets also are affecting food prices. Recent uprisings in Egypt and Libya have sent oil soaring to more than $100 a barrel. Food companies have absorbed some of those price shocks but will have to charge more for their products should oil markets surge higher, Alexander said.
"We're in a world today where food companies operate on the assumption that crude oil prices are going to be $85 to $95 a barrel," she said. "Current prices are somewhere around $105 to $110 a barrel."
Weather has played havoc with food production, as well. Drought devastated Russia's 2010 wheat crop, leading Moscow to ban wheat exports. Freezing temperatures this winter cut into Mexico's production of tomatoes and bell peppers.
Storms have battered the sugar industry, sending prices to more than double what they were in 2009.
"Brazil didn't have a great crop," Alexander said. "Add on top of that Australia, the third largest exporter of sugar in the world. Queensland, which is their sugar-growing area, had massive floods and then got hit by a cyclone."
Not all the news is bad for consumers. Milk production remains high, despite the poor prices dairy producers are receiving. And the total amount the average U.S. family spends on food continues to be about 10 percent of their take-home income, compared with 40 percent to 50 percent in developing countries such as Bangladesh.
"When you see massive food price inflation and food is half of your family's budget, it hurts substantially more," Alexander said.