Food Prices Drop for Second Consecutive Quarter

Weekend National News Focus:

American Farm Bureau Federation, April 2, 2009 – Retail food prices at the supermarket dropped slightly for the second consecutive quarter, according to the latest American Farm Bureau Federation Marketbasket Survey. The informal survey shows the total cost of 16 food items that can be used to prepare a meal was $47.41, down about 5.5 percent or $2.80 from the fourth quarter of 2008.

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Of the 16 items surveyed, 11 decreased and five increased in average price compared to the prior quarter. The overall cost of the marketbasket of foods in the first quarter dropped just under 1 percent compared to a year ago.

Shredded cheddar cheese, milk and vegetable oil showed the largest retail price declines and together account for most of the decrease in average price of the overall marketbasket. Shredded cheese dropped 70 cents to $4.24 per pound; milk dropped 67 cents to $3.15 per gallon; and vegetable oil dropped 38 cents to $2.79 for a 32-oz. bottle.

“Continued weak demand overseas for U.S. dairy products combined with increased on-farm production are behind the softening retail prices for shredded cheese and whole milk,” said Jim Sartwelle, an AFBF economist.

Other items that decreased in price were: Russet potatoes, down 31 cents to $3.05 per bag; eggs, down 28 cents to $1.50 per dozen; toasted oat cereal, down 22 cents to $2.91 for a 9-oz. box; apples, down 16 cents to $1.35 per pound; boneless chicken breasts, down 12 cents to $3.38 per pound; bacon, down 11 cents to $3.26 per pound; white bread, down 11 cents to $1.77 for a 20-oz. loaf; and orange juice, down 2 cents to $3.00 for a half-gallon.

“The retail price decline for eggs is due to a combination of slightly higher production coupled with weakened demand as consumers respond to the economic downturn by curtailing spending in all areas. Industry analysts are predicting that slightly lower retail egg prices and relatively higher egg production will continue throughout 2009,” Sartwelle said.

Five items increased slightly in price this quarter: ground chuck and sliced deli ham, up 8 cents to $2.94 and $4.94 per pound, respectively; sirloin tip roast and flour, up 5 cents to $3.99 per pound and $2.51 for a 5-pound bag, respectively; and American salad, up 2 cents to $2.63 for a 1-pound bag.

New this quarter, Farm Bureau is reporting average retail prices on different foods in the marketbasket with the addition of sliced deli ham, shredded cheddar cheese, chicken breasts, orange juice and bagged salad. Pork chops, block cheddar cheese, whole chicken fryers, mayonnaise and corn oil were dropped from the survey.

“The balance of foods in the marketbasket has been adjusted to track more closely with the way Americans currently shop for groceries,” Sartwelle said. “However, it’s important to note that the foods we no longer report prices on as part of the marketbasket survey remain staples in the American diet.”

Farm Bureau’s volunteer shoppers have been gathering pricing data on the “new” marketbasket foods for the past year, beginning in the first quarter of 2008.

“Starting with the report for the first quarter of 2009, we’re able to provide ‘year-to-year’ and ‘quarter-to-quarter’ comparisons on the updated marketbasket of foods,” Sartwelle noted.

According to Terry Gilbert, a volunteer shopper and Kentucky farmer who chairs the AFB Women’s Leadership Committee, “A trend that shows no signs of slowing down is consumers buying more fruits and vegetables, as well as pre-chopped and partially prepared foods. The updated marketbasket survey takes that into account and is more contemporary.

“Although this survey’s slight decline in retail prices for the quarter is welcome news, through our new nutrition fact sheets, we are pleased to offer consumers information on how to stretch their grocery dollars with healthy, nutritious food,” she said.

According to the federal government, the Consumer Price Index (CPI) for all food is projected to increase 3 percent to 4 percent in 2009.

As retail grocery prices have increased gradually over time, the share of the average food dollar that America’s farm and ranch families receive has dropped.

“Starting in the mid-1970s, farmers received about one-third of consumer retail food expenditures for food eaten at home and away from home, on average. That figure has decreased steadily over time and is now just 19 percent, according to Agriculture Department statistics,” Sartwelle said.

Using the “food at home and away from home” percentage across-the-board, the farmer’s share of this quarter’s $47.41 market basket would be $9.00.

AFBF, the nation’s largest general farm organization, has been conducting the informal quarterly marketbasket survey of retail food price trends since 1989.

According to USDA, Americans spend just under 10 percent of their disposable annual income on food, the lowest average of any country in the world. A total of 90 shoppers in 32 states participated in the latest survey, conducted in late February and early March.

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