Deflation in fruits and vegetables moderates retail food prices

09/25/2012 02:20:00 PM
Tom Karst

Deflationary trends in fresh produce pricing at retail have allowed consumer prices for all food to remain unchanged since the start of the year, the U.S. Department of Agriculture reported in September.

In the latest forecast  released by the USDA’s Economic Research Service Sept. 25, retail prices for fruits and vegetables are forecasted in a range to be from 0.5% lower to 0.5% higher for the year. For 2013, the USDA predicts retail prices for fruits and vegetables will rise between 2% and 3%.

Desmond O’Rourke, president of Belrose Inc., Pullman, Wash., said mid-market supermarkets are trying to make sure fresh produce prices are competitive with discounters.

“They have been trimming their marketing margin on fruits in particular to make these fruits available at reasonable prices, even though prices to the farmer have been rising,” he said.

Fresh vegetable prices are expected to decline between 1% and 2% this year and then increase 3% to 4% next year, according to the USDA. The agency said fresh fruit prices will rise between 1% and 2% this year and 2.5% to 3.5% next year.

The USDA said overall food inflation is forecast at 2.5% to 3% for the 2012, increasing to 3% to 4% next year. Food at home inflation was forecast for 2.5% to 3.5% for 2012 and 3% to 4% next year. Meanwhile, the USDA said food away from home prices will rise even less, from 2% to 3% this year, and 2.5% to 3.5% higher next year.

The USDA said retail food prices have been flat so far in 2012, thanks to deflationary pressure from unusually low fruit and vegetable prices and lower prices for milk and pork, helped counter higher prices for beef, poultry, fats and oils. Beef prices rose 10% in 2011 and are forecasted to rise 3.5% to 4.5% this year and climb 4% to 5% next year.

The drought’s effect on food prices will mainly be felt next year, the agency said.

“The severe drought in the Midwest is affecting prices for corn and soybeans as well as other field crops which should, in turn, increase retail food prices. However, the transmission of commodity price changes into retail prices typically takes several months to occur, and most of the impact of the drought is expected to be realized in 2013,” the USDA said.



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