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November 26, 2008

Energy prices plummet; food prices don't

Soaring energy costs got blamed for boosting food prices over the last few years, so you might think that plunging energy prices now would cause an equal decline for food.

But it’s not happening. I paid $1.87 for gas last week and $3.57 for a gallon of milk. The gas was less than half what I was paying last summer. But the milk was down only moderately from the $4.20 range I remember from a few months ago.

This shows up in the official stats from the Labor Department. Consumer prices fell 1 percent in October while energy dropped 8.6 percent. Regular unleaded gas fell 14.2 percent. But overall food and beverage prices rose 0.3 percent. Milk dropped 1.8 percent.

Food prices rose partly because more-expensive costs for petroleum -- used for everything from tractor fuel to fertilizers and pesticides -- got passed along to consumers. U.S. farmers were also diverting corn supplies to ethanol distilleries, which made feed corn more expensive.

But there were other factors. A weak dollar boosted U.S. food exports. Developing nations such as China increased demand for meat. Bad weather in Europe and Australia hurt supplies. The dollar has strengthened lately, and the economic slump should reduce overseas demand. Those factors along with cheaper energy should help household food budgets. Good harvests would help even more.

Posted by Jay Hancock at 10:45 AM | | Comments (1)
        

Comments

Why is no one talking about this? This is not the first time this has happened and I consider it profiteering. We always hear excuses for price increases but never hear of any corporation adjusting their prices back down after the crises has passed. Inflation is going to get to the point that millions sink into poverty and tens of thousands end up on the street.

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About Jay Hancock
Jay Hancock has been a financial columnist for The Baltimore Sun since 2001. He has also been The Baltimore Sun's diplomatic correspondent in Washington and its chief economics writer. Before moving to Baltimore in 1994 he worked for The Virginian-Pilot of Norfolk and The Daily Press of Newport News.

His columns appear Tuesdays and Sundays.
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