When will food prices stop rising? No time soon, experts say

ByABC News
June 6, 2008, 5:51 PM

WASHINGTON -- Any spike in prices begs the question: When will it end?

Unfortunately, for millions of cash-strapped consumers, the cost of putting a meal on the table or a beer on the bar is likely to remain high for years, economists say.

Typically, food price swings go through cycles that can last a few years. That was the case in the 1970s, when food prices were pushed up by high energy costs, decreased supplies and regional droughts.

But those forces were fairly elastic, and prices contracted again. From the mid-1970s until recently, food prices on average fell dramatically.

This spike is different.

"Some of the reasons are rooted in the new world economy," said Edward McLaughlin, an expert on food retailing at Cornell University.

Those reasons include the use of grains for fuel and the developing world's increasing demand for a higher-protein diet, which also cuts into grain supplies. Add those factors to more typical trends, like soaring energy costs, and it's clear the latest jump in prices has unique twists for consumers the world over, economists say.

Perhaps most worrisome, some leading causes of the recent price increases show no signs of receding, prompting some economists to warn of "the end of cheap food."

The Agriculture Department expects U.S. food prices to rise beyond inflation for the next few years.

"The question now is the rate of the increase," said Ephriam Leibtag, an economist with the department's Economic Research Service.

Overall, food prices in this country have gone up almost 5% during the past year, the highest annual increase in almost 20 years, according to the Labor Department. Some staples have risen well beyond that.

Egg prices have shot up more than 30%, dairy prices have jumped 12% and the price of baked goods has risen 9%.

In 2008, the consumer price index for all food is projected to increase 4% to 5% as retailers pass on higher energy and commodity costs to consumers.

That's almost twice the inflation rate of about 2.6%.