What’s up with food prices?
Date posted: February 15, 2011
The latest inflation report from the government shows that prices for some food items are rising relatively rapidly. Meat prices are up almost 6 percent in the last year, and dairy prices have risen about 4 percent. N.C. State University economist Mike Walden explains what’s going on.
“In general if you look at inflation across everything that we buy, it is not a problem. It is running between 1 and 2 percent annually. But you can always have individual items within that inflation index, some of them going up in price faster others going down. And we’ve certainly had an issue … with some food prices.
“What’s behind this, really, is weather conditions … . Last year there was a horrific drought in the growing regions of Russia and South America. What this has done — it’s reduced the supply of grains on the world market. Now what’s that have to do with meat and things like milk? Well, grains are used as feed for dairy cattle as well as for meat cattle. And so if that grain is more expensive, that is going to be passed on to the consumer in terms of higher dairy prices and meat prices. So there is this direct relationship, I think, between problems in weather, weather-induced problems and prices we pay at the supermarket counter.
“Now the good news is that if you look at what we spend for meat and for dairy, those two items account for only 2.5 percent of all spending by consumers on everything. So although those may be headline items that we see posted — and we see those prices in the supermarket — fortunately at least right now, they are not having a big impact on the overall inflation rate.”
Category: Economic Perspective