SYRACUSE -- Grocery prices are already up three percent over last year, according to the Federal Bureau of Labor Statistics, and predictions are that they'll be a lot higher very soon.
Professor Harjit Arora, from LeMoyne College's Economics Department, says the immediate increases are because of 'fear speculation' such as worries that oil and gas prices will contribute to increased production costs. But, she says, the current worries over unrest in the Middle East and its impact are minor compared to other trends.
Global demand will hit us especially hard. The United States already is the world's biggest food exporter, and there's increasing demand overseas (by 2025 there will be 5.1 billion 'middle class' people in the world, compared to 4 billion now. They will have increased buying power). In addition, with the dollar weaker, it 'pays' big producers to sell overseas because their profits are higher.
Interestingly, some countries control imports to protect home markets. For example, India bans the import of onions to give local growers a better price.
Another factor, Professor Aurora says, is that more of our staples are being diverted to 'green' - corn to ethanol, soybeans to biodiesel, and that is driving up prices for crops that make up huge parts of many foods and oils.
With prices going up, why is it not showing up in inflation indexes? Prof. Aurora says food is only a very small part of where we spend our money, about 8% percent in this country compared to 57% in India and 33% in China, so it's a very small factor when we look at the overall cost of living increases. Still, that segment is going up: just take a look at the April report from New York's Agriculture monitors, and there's also word that more big companies including Procter and Gamble, Unilever, and Pepsi are raising prices and that has economists saying we'll have even more sticker shock when we grocery shop.
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