Increase In Food Prices Expected To Slow This Year

Food prices in the United States are likely to increase less than the rate of inflation this year, with meat prices expected to decline, government economists say.

However, the price of milk should rise by 4 percent to 5 percent over last year because of the lowest surpluses of dairy products since the mid-1970s, the Agriculture Department predicted.

The Consumer Price Index for food rose 2.8 percent last year - the overall CPI was up 2.5 percent - and higher prices for fruits and vegetables were the prime reason, USDA Chief Economist Keith Collins noted in a report to the annual Agricultural Outlook Forum.

“In 1996 the highlight for the American consumer will be food-price increases below the overall inflation rate, as the strong increase in meat production lowers meat prices slightly,” Collins said. Red meat and poultry account for 24 percent of the at-home food CPI.

With average weather, Collins added, this year’s fruit and vegetable price increases should be less than last year’s. Although the price of cereal and baked goods should go up, the increase is likely to be no more than about 5 percent because farm-level grain prices represent only about one-tenth of the retail prices of the finished products.

USDA foresees record-high season-average farm prices for wheat in this harvest year. Carryover stocks of wheat on June 1 are forecast at 346 million bushels, which, as a percent of total use, would be the lowest since 1947-1948.