Don't Expect Lower Prices For Groceries

Commodity prices are sinking, but don’t expect it to result in cheap loaves of bread, warns the Wall Street Journal today. Farmers are cutting production, planting fewer crops and producing less dairy, meat, poultry, and soybeans. As a result, the price of food isn’t expected to drop in line with commodity price dips.

The paper says “farmers are expected to plant the fewest acres of cotton since 1983,” and “production of meat from every major category of farm animal is supposed to drop for the first time since 1973.” Other key statistics: “The USDA is predicting that net farm income, a rough measure of profitability, will sink 20% this year to $71.2 billion,” “hog prices are down 28%,” and corn has fallen from $7 a bushel last summer to about $3.50 now.

Those sinking prices don’t equal cheap food says Michael Swanson, an economist at Wells Fargo & Co., who says retail food prices will climb 2.5% to 3% in 2009, on top of the 5.5% rise in 2008.

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