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Food Fight! Stores, Producers, Consumers Battle Over High Food Prices

Tuesday, March 13, 2012 1:21
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Sabine Scheckel / Getty Images

Sabine Scheckel / Getty Images

Here’s a news flash that won’t be remotely surprising if you’re responsible for grocery shopping in your house: The cost of food has been rising. In the past year, consumer food prices have increased 4.4%, compared to a 2.9% price increase for all consumer purchases. The costs of a few foods in particular have skyrocketed: In 2011, meat, coffee, and peanut butter prices rose 9%, 19%, and 27%, respectively. While some are predicting that food prices will plateau or even fall, it appears as if increased regulation and production costs will continue to mean higher food prices for wholesalers, and these higher costs will inevitably be passed on to consumers.

Last summer, corn prices hit a record-high of $8 a bushel. Naturally, to get in on the action, farmers all over the globe have shifted production to grow more corn. As a result, prices for “the big daddy of the major U.S. crops,” according to Reuters, could fall 20% this year. Even if that happens, U.S. farmers should still be in good shape, with total domestic farm income anticipated at $96 billion, the second-best year ever (after 2011).

Corn may be the “big daddy” in the farming world, but even if corn prices come down, most consumer food costs appear to be headed in the other direction. The increase in gas prices is one reason why food prices are likely to keep rising, but it’s not the only one.

(MORE: You’re Already the Victim of Inflation)

The New England Complex Systems Institute released a study last week linking speculation in global commodity markets to rising food prices. The study indicates that spikes in food prices in 2008 and 2011 came largely as a result of investor speculation and increased ethanol conversion, in which corn is used for fuel rather than food. The authors expect another “food bubble” to occur by 2013, which “may lead to major social disruptions” on par with the riots and unrest in North Africa and the Middle East in 2008 and 2011.

Another study, published last week by the United Soybean Board, warned that proposed regulations on poultry and livestock farmers could increase production costs by 25%, which could translate into consumers collectively paying up to $16.8 billion more annually for meat, milk, and eggs.


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