The 10 fastest-rising food prices at the grocery
Food prices at the grocery store are up, following an increase in production costs and wholesale prices. In March, retail food prices rose 0.4% from the preceding month, matching February's increase. These marked the largest monthly gains in food prices since September 2011, according to data from the Bureau of Labor Statistics (BLS).
Food prices are often volatile and are affected by a number of factors. While certain factors reflect human decision — such as the changing tastes of consumers and farmers' planting choices — others are forces over which farmers have very little control. Issues such as weather conditions and diseases can cause severe supply shortages that cause the price of products to rise.
In recent years, drought in the western U.S. has driven up the prices of meat, dairy, fruit and vegetables. Parts of California, the Southwest, and the Great Plains have suffered from three consecutive years of drought, according to Brad Rippey, meteorologist for the U.S. Department of Agriculture (USDA). More than two-thirds of California is currently covered by extreme drought, according to the U.S. Drought Monitor.
Of course, drought directly impacts crops. "Agriculture uses about 80% of California's water," Rippey told 24/7 Wall St., and, because of cutbacks in water delivery, "a lot of fields may have to lay fallow."
Drought has also driven up meat prices because it caused feed prices to spike in recent years, Rippey added. The higher feed prices increase the cost of raising cattle for slaughter and, in the end, the meat prices for consumers. Bacon prices have gained more than nearly any other food tracked by the BLS since the start of the decade, rising 35% to $4.13 per pound.
The price of the only food product that has risen more than beef is bacon, which soared 53% since January 2010. This is due in large part to the spread of Porcine Epidemic Diarrhea Virus (PEDv) in hogs. Although the disease has no effect on humans or food, it can be fatal for young pigs and is therefore expected to cut into hog production considerably. Ham and pork chop prices have also increased since 2010, up 32% and 24%, respectively.
Diseases are hardly limited to livestock. Citrus fruit, too, has suffered from a disease. Production of both oranges and grapefruits has dropped as citrus greening disease has damaged Florida crops — which account for the majority of grapefruits and oranges produced in the U.S. Trade publications, national media, and even the USDA have portrayed the disease as a threat to the survival of the citrus industry.
Demand is another key factor that drives food prices. According to Steve Freed, vice president of research at ADM Investor Services, the agricultural world pays attention to a number of trends that can drive prices. These include the state of major economies, such as the U.S. and China, as well as consumer tastes. "We'll be watching any change in U.S. and world diet," he added.
To identify the food prices that have risen the most, 24/7 Wall St. examined average retail price data published by the BLS Consumer Price Index (CPI) for the period January 2010 through March 2014. Similar kinds of products, including certain beef and pork products, were grouped together to avoid duplication. We also reviewed data on commodity futures from CME Group and the IntercontinentalExchange Group for a range of products. A number of reports produced by the USDA were also considered.
These are the 10 fastest rising food prices.
1. Bacon
> 4-yr. change: +53%
> 1-yr. change: +13%
> Current price: $5.55 per lb.
Sliced bacon cost an average of $5.55 per pound as of March, up from $3.63 per pound in January 2010. In the last year alone, the price of bacon increased 13%. One factor that may contribute to this recent increase may be the spread of Porcine Epidemic Diarrhea Virus (PEDv) in hogs. While PEDv poses no risk to humans or food safety, the disease is expected to cut into hog supplies. Sam Hines, executive vice president of the Michigan Pork Producers Association, told CBS Radio that "U.S. production is going to decline this year about seven percent and that will probably translate into 10 to 20 percent higher prices for pork." Currently, lean hog futures — settling in May — are up over 20% on the year, and consumer prices of products such as pork and ham may increase further. Ham prices are up 32% since January 2010, and 6% since last March. Similarly, pork chop prices are up 24% and 8% during those periods.
2. Ground Beef
> 4-yr. change: +35%
> 1-yr. change: +8%
> Current price: $4.13 per lb.
Drought in the Western U.S. and declining numbers of cattle being sent to slaughter are both major causes of higher beef prices, according to the USDA. Futures for live cattle — which are cattle ready for slaughter — reached an all-time high earlier this year. These higher futures prices appear to be showing up at the register. The price of a pound of uncooked ground beef has risen 35% since 2010. And for some types of beef, the price increases have been even greater. For example, lean and extra lean ground beef now costs $5.27 per pound, a 55% increase from January 2010 as well as an all-time record.
3. Oranges
> 4-yr. change: +35%
> 1-yr. change: +23%
> Current price: $1.21 per lb.
Florida citrus growers have had to contend with citrus greening, a disease spread by a small invasive insect called the Asian citrus psyllid. The disease has hit citrus growers hard, cutting significantly into crop production. The lower supply, in turn, has led to increased prices, both in the futures market for frozen orange juice concentrate, as well as for consumers. Since the start of 2010, the price for navel oranges has risen 35%. However, much of this increase was just in the last year, as consumer prices for oranges rose 23% between March 2013 and March 2014 — more than any other food product. And prices may continue to rise. According to the USDA's National Agricultural Statistics Service, U.S. national orange production is forecast to decline 18% from the previous year to a total of 166 million
4. Coffee
> 4-yr. change: +31%
> 1-yr. change: -17%
> Current price: $5.00 per lb.
Brazil, the world's largest supplier of arabica beans, has suffered from a severe drought this year. But because many producers have amassed stockpiles, and top coffee retailers such as Starbucks have locked-in short-term prices, consumers have yet to feel the pinch from the poor crop year. Coffee futures, however, have risen considerably — up nearly 70% year-to-date. For consumers, coffee prices have actually declined in the last year — although coffee prices in general have risen 31% since the start of 2010. Higher prices may eventually reach consumers. A USDA study found that retailers were less likely to considerably raise prices in response to short-term increases in commodity prices. However, where higher costs lasted for longer periods, costs would be shifted to customers.
5. Peanut Butter
> 4-yr. change: +30%
> 1-yr. change: -2%
> Current price: $2.71 per lb.
Like several food products with rising prices, the poor growing conditions for peanuts in recent years are behind the increase in peanut butter prices. While prices are down slightly from a year ago, peanut butter still costs an estimated 30% more than it did in 2010. Much of the price increase followed the abysmal 2011 growing season in the Southern U.S. — nearly half of the nation's peanuts are produced in Georgia. Output in 2012 was considerably better, but in 2013 production fell again, down 38% from 2012. A significant uptick in Chinese demand in 2012 may have also increased prices, although exports to China have since leveled off.
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