Food Stocks Under Pressure; USDA Estimates 4 Percent Rise in Food Prices
Friday, February 25, 2022 2:56 PM

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Reportedly, more than 44 million people during the past eight months have been driven into poverty. Increased food prices are becoming a serious issue in most of the emerging economies where people are struggling to earn bread and butter. The food-inflation has already pushed millions of people into extreme poverty and is more vulnerable to those who spend more than half of their income on food.

This continuous increase in the prices of grains has been enhancing food inflation in emerging economies from a long time now. The World Bank’s food price index rose by 15 percent between October 2010 and January 2011, 29 percent above its level a year earlier and is only 3 percent below its 2008 peak. Unlike during the food crises in 2007-08, the higher prices have not yet affected all the regions of world.

The droughts and storms acted as a catastrophe, which affected the world's leading agriculture-producing countries, including flooding and a massive cyclone in Australia, major winter storms in the United States, and fires last year in Russia. As commodity prices continue to rise, the food producers in US see their profit margins to decline in 2011.

Following the spread of the food inflation, the US Department of Agriculture (USDA) raised its food-inflation forecast to be in the range of 3-4 percent for FY’11. The USDA anticipates food prices this year to jump at roughly twice the general inflation rate. Apparently, higher food commodity and energy prices were behind the expected rise in prices. The Consumer Price Index for all food increased 0.8 percent between 2009 and 2010, the lowest food inflation rate since 1962.

Several major companies announced the price rise corresponding to higher commodity prices in recent months. Although, the economy has entered in its recovery phase, higher unemployment level still threatens the ability to cope up with this increase in food prices. The concern of rising food-inflation around the globe has been one of the agenda in the recent G-20 summit held in Paris.

Kraft Foods Inc. (NYSE: KFT) recently intimated about the increase in its commodity costs in North America between $700 million and $800 million in 2011 from last year. Texas Roadhouse Inc. (NasdaqGS: TXRH), a 345-unit steak chain based in Louisville, Ky., said it would raise menu prices by 1 percent, even though it expects its food costs to rise by 3 percent this year.

The cost of processing food is soaring as the demand for the US produced commodities is increasing. China is expected to be the main importer of the nation’s exports, amounting to $20 billion, surpassing Canada $18.6 billion. Fiscal 2011 agricultural exports are forecast at a record $135.5 billion while imports have been forecast at $88 billion. Slow economic growth and a weaker dollar have been major factors in the strong growth in agricultural trade and these factors are expected to continue in 2011.



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