Food's Getting Pricier Than Fuel

When we think of inflation, we often think these days of how gas prices have risen just a bit in recent years. It's important to keep gasoline in mind, because those who report inflation numbers often don't. As I explained in a previous article, those looking at so-called core inflation levels are ignoring food and fuel prices, which are conveniently left out of the calculation.

We've heard plenty about rising fuel prices, but have you stopped to notice what's going on with food prices? They're exploding. The Wall Street Journal recently reported that rising prices and surging demand for major crops have led to big changes in food markets. According to the article, corn prices are up 40%, soybeans up 75%, and wheat 70% and more -- and they're expected to stay high for years. Meanwhile, the wholesale price of chicken is up 15% this year, while the retail price of whole milk has jumped 26%.

Why?
Some blame higher prices on increased production of ethanol, which requires crops such as corn. Others blame bad weather, which has hurt many crops. Another explanation is the growing middle class abroad and its demand for food. But the reasons may not matter as much as what we do about it. For starters, prepare to increase the portion of your budget devoted to food.

This increase will affect companies, too. You can expect to see higher prices at the grocery store as food giants such as Archer Daniels Midland (NYSE: ADM), ConAgra (NYSE: CAG), and Sara Lee (NYSE: SLE) pass along rising prices. Expecting cheap eats from places like McDonald's (NYSE: MCD) and Yum! Brands (NYSE: YUM) might soon be a thing of the past.

© 2007 Universal Press Syndicate.