Fresh vegetable price inflation slows

03/27/2012 12:31:00 PM
Tom Karst

Fresh fruits will show inflation above the all-food average for 2012 but retail prices for fresh vegetables will be below the all-food inflation trend line.

In the latest food price forecast, the U.S. Department of Agriculture’s Economic Research Service reported that fresh fruit and vegetable prices were up 4.5% in 2011 but were only projected to rise 2% to 3% in 2012.

Fresh fruit prices were up 3.3% in 2011 and are expected to increase 3% to 4% in 2012, said to Ricky Volpe, economist with the USDA ERS.

Meanwhile, he said fresh vegetable retail prices rose 5.6% in 2011 but are projected to increase just 1% to 2% in 2012.

“Inflationary figures are down from 2011 but food prices themselves are not down,” he said. “Our projection is for lower inflation overall but we don’t have any forecast for food price deflation, not for any of our major categories,” he said.

Volpe said prices will continue to rise, but at a slower rate than 2011.

Fresh vegetables have shown seasonal deflation compared with year ago levels.

February 2012 prices for fresh vegetables were down 7.9% compared with February 2011. “The reason why we see that is that last year was a very bad year for fruits and vegetables with a lot of bad weather,” Volpe said. Weather conditions this season have been favorable for production and prices have eased with greater supply.

Even with the spike in fuel prices in 2012, Volpe said relationship between fuel prices and food prices is not as strong as some people think it is.

Volpe said fuel prices are about ten times more volatile than food prices.

He said economists believe that if fuel prices double, the net effect would be an increase in retail food prices of about ten cents on the dollar.

The agency projects all food inflation for 2012 at 2.5% to 3.5%, compared with 3.7% in 2011. Food away from home prices are projected to increase 2% to 3% in 2012, up from 1.9% inflation in 2011. Food at home is expected to show inflation of 2.5% to 3.5%, down from 4.8% a year ago.

Among other food sectors, beef prices increased more than 10% in 2011 and another 4% to 5% rise in beef prices is expected this year based on strong export demand and historically low cattle inventories, Volpe said. Dairy products are expected to increase 2% to 3% after rising 6.8% in 2011, and poultry prices are projected to increase 3% to 4% after a 2.9% increase last year.



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