Beef, Laundry Detergent Prices Expected to Rise in 2012

March 9, 2012 — -- Food prices are on the rise both in the U.S. and internationally because of bad weather and rising oil prices, but products we use at home including detergents are spiking as well.

The UN's Food and Agriculture Organization said its price index rose 1 percent from January to February, after rising almost 2 percent in January. The packaged food giant Kraft Foods, for example, raised prices 7.6 percent worldwide in the fourth quarter of 2011.

Speculation is blamed for part of the increase in food prices, placing poorer countries more at risk of social unrest, Wired Magazine reported.

The U.S. Consumer Price index (CPI) for all urban consumers increased 0.2 percent in January on a seasonally adjusted basis, the Bureau of Labor Statistics reported Feb. 17. Over the last year, the food index rose 4.4 percent.

Higher oil prices add to the cost of producing and transporting food and consumer staples. Oil rose for the second day on Thursday as Iran, the second-biggest OPEC producer, cut production after the U.S. and European nations imposed sanctions on the country related to its nuclear program.

Crude oil for April delivery settled at $106.58 a barrel on the New York Mercantile Exchange at $106.58.

Bill Lapp, president of Advanced Economics Solutions, an economic research firm focused on the food industry, said beef will have the most noticeable price increase this year of all foods, after record increases in 2011.

Lapp's company is projecting a 12 percent increase in the cost of beef this year, most of which will be passed on to consumers. He said consumers could see increases of as much as 10 percent because a large amount of beef is sold in "retail cuts."

Limited beef supplies, in part due to reduced production, and continued strong export demand are driving the increase in prices.

Chicken prices will generally be higher in 2012 because of reduced supplies as chicken producers in the U.S. faced poor margins in 2011. Lapp said the resulting cutbacks will limit supplies and lead to higher prices.

Fuel prices are eventually passed on but retailers and restaurants face difficulty on passing those onto consumers as the businesses battle for a consumer's limited budget.

Rising fuel prices can also be attributed to the growing use of bio-diesels, said Tom Branna, editorial director of the Household and Personal Products Industry (Happi) magazine.

That has led to a rise in raw materials across the board because many chemical derivatives come from oil, which may affect household products like detergents.

Last June, Procter & Gamble, the world's largest household products maker, increased detergent prices by 4.5 percent, Happi reported. The company, based in Cincinnati, makes Tide, Gain and Era laundry detergents.

While laundry products have been engulfed in a "price-cutting atmosphere," Branna said marketers will think of new related products with higher margins to make up for any potential losses.

Procter & Gamble introduced Tide Pods last month after delaying the launch from August. Touted as the biggest laundry innovation of the year, a pod is a single-dose, dissolvable packet of detergent, stain fighters and brighteners all in one.

The retail price for a 35-count is $9.99, the 57-count will retail for $14.99 and the 90-count is $21.49. The company says the products are more expensive than traditional detergent but in line with other premium laundry products such as Tide with a Touch of Downy.

Branna said other manufacturers and markets are expected to follow suit and create similar premium laundry products.

"They're hoping consumers say, 'I like the use of the pods because they're easy to use and I'll pay the price for it,'" Branna said.