food price inflation
Though tame through most of last year, food inflation has begun to surge again in 2013 - just as Money Morning Global Resources Specialist Peter Krauth predicted it would.
"Food inflation hasn't reared its head for some time, and I think it's about to start making headlines again before long," Krauth wrote in a Jan. 18 note to subscribers of his Real Asset Returns investment service.
Sure enough, an inflation report yesterday (Wednesday) from the Labor Department showed that the biggest increase in January prices came in the food category.
Food prices - for both groceries and food eaten at restaurants - rose 0.7% in January, compared with December, accounting for more than three-fourths of the increase in the Producer Price Index (PPI).
The biggest driver of food inflation in January was the cost of vegetables, which rocketed 39%, withbroccoli, cauliflower and lettuce increasing the most.
The U.S. Department of Agriculture's Economic Research Service is projecting food prices in 2013 will increase 3% to 4%, an annual increase the agency says is above the historical average.
The ERS said it expects animal-based food products (mostly meats) to be hit hardest, with cereals and bakery products also seeing above-average price increases.
The return of food inflation to the U.S. should come as no surprise, as it has become a worldwide trend over the past decade.
The Food Price Index developed by Food and Agriculture Organization of the United Nations has more than doubled from 97.7 in 2003 to 209.8 now following a decade of stability. (The index stood at about 102 in 1993.)
U.S. Food Prices 2013: How to Profit from the Pain
Rising U.S. food prices in 2013 are about to send U.S. consumers' grocery bills to new highs.
You see, the United States is in its worst drought since the Dust Bowl. Brutal heat waves and barely any rain have crippled farms across the country.
The U.S. Department of Agriculture (USDA) on July 25 issued a report warning every American to expect to pay 3%-4% more for groceries in 2013. That follows a 3.7% food price jump in 2011, and 3.5% expected in 2012.
"The drought is really going to hit food prices next year," Richard Volpe, a USDA economist, told Reuters. He said the pressure on food prices would start to build in 2012.
"It's already affecting corn and soybean prices," Volpe said, "but then it has to work its way all the way through the system into feed prices and then animal prices, then wholesale prices and then finally, retail prices."
Beef prices will be hit the hardest, as they are expected to rise 4%-5%, followed by dairy prices which could climb 3.5% -4.5%. Poultry and egg prices in 2013 are projected to go up 3%-4%, and pork prices 2.5% to 3.5%, the agency said.
But consumers don't have to succumb to the higher prices. You can actually profit from this trend by investing in these rising costs.
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