Food Prices Make Biggest Jump In 36 Years

Rise in vegetable costs represent the largest increase, but meat and dairy also saw spikes

Wholesale food prices spiked 3.9 percent in February from January, the biggest jump in 36 years.

Most of the increase was because of a sharp rise in vegetable costs, although meat and dairy prices also jumped. Harsh winter freezes in Florida, Texas and other Southern states damaged crops and drove up vegetable prices. Meanwhile global prices for corn, wheat and soybeans have risen sharply in the past year. That raised the price of animal feed, pushing up the cost of eggs, beef and milk at the wholesale and consumer level, according to the report.

Corn prices are up 59.4 percent from last year. Wheat is up 81 percent, and soybeans are up 29 percent, said Ephraim Leibtag, deputy director for research at the U.S. Department of Agriculture's Economic Research Service.

The USDA forecast projects consumer food prices will rise 3 to 4 percent this year.

The wholesale price report comes ahead of a Labor Department report on consumer prices, due out today, forecast to show overall prices rising 0.4 percent in February. The January report showed sharply higher year-over-year price increases for several foods, including citrus fruit, up 10.6 percent; pork, up 9.9 percent; ground beef, up 9.9 percent; coffee, up 4.9 percent; and potatoes, up 5.9 percent.

Those increases preceded the recent run-up in oil prices that drove gas prices higher amid unrest in Egypt and Libya. The higher energy costs will also affect grocery prices, Leibtag said.

Brian Todd, president of the nonprofit Food Institute, told the newspaper that whether the higher gas prices will translate into even higher grocery prices for consumers will depend on how long the spike in gas prices lasts. Retailers have focused on cost-cutting and are concerned about passing price increases on to consumers, he noted.

“They are very cognizant of the fact that consumers are very budget conscious and they have many options to take their business to alternative retailers — their competitors,” he said. “That plays a major role in them holding increases to a minimum level or not passing them on at all.”

Still, the higher wholesale prices are bringing visible changes. Wendy's, which is paying higher prices for tomatoes, now puts them on hamburgers only by request. Starbucks and Dunkin' Donuts have raised prices because they're paying more for coffee beans, the report said.