Food prices expected to rise

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WASHINGTON, March 17 (UPI) -- A jump in wholesale food prices in February will translate to higher prices in grocery stores, a U.S. government economist said.

"Food prices have been rising a lot faster, because underlying costs have really shot up. You're seeing some ingredients up 40 percent, 50 percent, 60 percent over last year," said Ephraim Leibtag at the U.S. Department of Agriculture, the Los Angeles Times reported Thursday.

"When you see wheat prices close to 80 percent up, that's going to ripple out to the public," he said.

Wholesale food prices rose 3.9 percent in February from the previous month, the Labor Department reported this week. On Thursday the Labor Department said consumer prices for food rose 0.6 percent January to February and had climbed 2.3 percent over 12 months.

Experts expect the trend to continue. Detrimental weather, including a drought in China and floods in Australia, "may become more the rule than the exception," said Clive James, founder of the International Service for Acquisition of Agri-Biotech Applications.

The USDA estimates food prices will rise up to 4 percent in 2011. As consumers focus on fast-rising gasoline prices, they may be hit with renewed concern over their ability to afford groceries.

The United Nations and the World Bank have warned of rising food prices, which are partly the result of increased demand.

In China, where the middle class is growing, consumer demand for chickens has risen 219 percent from 1983 to 2006, the Chinese Ministry of Agriculture said.

Rising oil prices also puts pressure on food prices, as does the use of crops for biofuel. Various U.S. food sellers, including restaurant chain McDonald's, have warned they could raise prices this year.

C. Larry Pope, chief executive officer of Smithfield Foods, said, "Retailers understand there will be more price pressure."

Are consumers ready? At a recent speaking event in New York, New York Federal Reserve President William Dudley was given a negative reaction when he tried to explain that stagnant core prices -- which exclude food and energy prices -- were a sign of a slow economy, The Wall Street Journal reported at the time.

Dudley admitted food prices were rising, but the audience was rankled. "When was the last time you, sir, went grocery shopping?" a member of the audience asked.