February retail produce prices rise most since 2008

03/17/2011 03:15:44 PM
Bruce Blythe

Retail prices for fresh fruits and vegetables last month posted the biggest increase in more than two years, reflecting shortages of some products after freezing weather destroyed crops in key growing areas of Mexico and the southern U.S.

Average nationwide prices for fruits and vegetables rose 5.6% last month compared to February 2010, according to the U.S. Bureau of Labor Statistics.

That was the largest year-over-year gain for any month since October 2008.

The first killing freeze since the 1950s struck Southern Sinaloa state, Mexico’s primary supplier of winter vegetables, in early February, cutting supplies of tomatoes, bell peppers and other crops. Unusually cold weather also hurt lettuce crops in Arizona and citrus groves in Florida earlier this year and late last year.

Surging fruit and vegetable prices are contributing to accelerating food inflation that’s pushing Americans’ grocery bills up even as unemployment remains near three-decade highs. Rising export demand for U.S. farm products and oil prices around $100 a barrel are also contributing to food inflation, analysts say.

The retail price outlook for this year is looking increasingly like 2008, when food inflation rose 5.5%, the biggest annual gain over the past two decades, analysts say.

“Given the structural nature of the factors leading to the current increase in commodity prices, it is likely that retail food inflation will remain above the historical average of 2.8% for the near future,” said Ephraim Leibtag, an economist with the U.S. Department of Agriculture.

Other government figures this week suggest supermarket prices will rise further. Wholesale food prices increased 3.9% in February, the biggest jump since 1974, according to the Labor Department’s Producer Price Index report, released March 16.

Competition among major food retailers is sure to intensify as grocers step up promotions and discounts, industry consultant Phil Lempert said.

“Expect a new level of price war advertising from retailers,” said Lempert, who runs SupermarketGuru.com.

Compared to January, February retail fruit and vegetable prices rose 2.2%, the biggest increase among six food categories tracked by the Bureau of Labor Statistics. Prices for meats, poultry, fish and eggs rose 1.2%.

Among specific products, field-grown tomatoes averaged $1.83 a pound nationwide at retail last month, up from $1.59 in January and $1.77 in February 2010, according to the bureau. Iceberg lettuce averaged $1.14 a pound, up from 94 cents in January and 84 cents in February 2010.

For the broader food at home category, retail prices during February rose 0.8% from January, the largest month-over-month increase since July 2008, according to the March 17 report. Over the past year, food at home rose 2.8%, the largest increase in almost two years.



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