Much to their dismay, shoppers have observed rising food prices in recent years. And they should get ready for still higher prices in the future.
Consumer prices have risen 6.4 percent since 2011. But some food items have outstripped inflation during the period. Bacon is up 22.8 percent, chicken 18.4 percent, and ground beef 16.8 percent.
The increases can be explained through the immutable laws of supply and demand. Increased demand for corn – an essential ingredient in the production of beef, pork, and poultry – for making ethanol caused corn prices to rise. This raised the cost of producing meat and poultry products, resulting in higher prices on grocery shelves.
Another factor also comes into play regarding beef. Supply has declined because the size of the nation’s beef cattle herd is at a 63-year low.
Another supply-demand imbalance will inevitably cause spikes in prices of certain crops grown in California. The state, possessing the world’s 10th largest economy, is currently experiencing the driest year on record.
The drought will cause the supply of artichokes, celery, broccoli, and cauliflower to decrease. And as this takes place, prices of these items in grocery stores will rise 10 percent or more. Significantly, California accounts for more than 80 percent of the nation’s supply of these crops.
Adding to the escalating prices of some food items is the projection for record milk prices. Analysts warn that prices could reach unprecedented levels this month.
Global demand for milk products has jumped substantially. The surge comes primarily from rising consumption in China.
Dairy farmers in the United States have not been able to increase production enough to meet the rising demand. Higher feed costs, particularly corn, have dampened their ability to do so. And this could lead to a 10 to 20 percent increase in retail milk prices.
Rising food costs underscore the important role economics plays in our everyday lives. In an often-quoted passage, British economist John Maynard Keynes succinctly summarized the crucial role of economics.
Keynes, founder of the Keynesian school of economics currently embraced by the Obama administration, wrote, “Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist.”
Wayne Curtis, Ph.D., is a former superintendent of Alabama banks and Troy University business school dean. He is retired from the board of directors of First United Security Bank. Email him at wccurtis39@gmail.com.
