Grocery Prices Increase in First Quarter of the Year

INDIANAPOLIS, IN - A national survey of grocery store prices conducted by Farm Bureau showed that retail food prices at the supermarket increased slightly in the first quarter of 2007.

The informal survey shows the total cost of 16 basic grocery items in the first quarter of 2007 was $41.34, up about 4 percent or $1.65 from the fourth quarter of 2006. The figures taken from Indiana's portion of the survey also showed an increase.

A total of 62 volunteer shoppers in 28 states, including Indiana, participated in this latest survey, conducted during February. It shouldn't be considered a scientific survey but is instead a snapshot of actual food prices in actual grocery stores during a given week.

All but four of the 16 food items in the survey (five according to the Indiana figures) showed at least some increase, resulting in an overall increase nationally of 1.5 percent compared to one year ago. The increase shown by the Indiana figures was much greater - increasing from $36.66 a year ago and $34.11 in November 2006 to $40.69 in 2007. However,  according to Terry Francl, senior economist with the American Farm Bureau Federation, that was probably due to the small size of the Indiana sample,.

Although on the national survey 12 items increased in price and four decreased while in the Indiana figures 11 increased and five decreased, which on the face of it sounds as though the two sets of figures resemble each other, in reality there was a significant amount of disagreement between the national and Indiana figures concerning what went up and what went down.

Item                                   AFBF 1st quarter average                    Indiana 1st quarter average
Apples (1 lb.)                    Down 6 cents to $1.30                      Down 14 cents to $1.31
Potatoes (5 lbs.)               Up 15 cents to $2.46                         Down 7 cents to $2.11
Ground chuck (1 lb.)         Up 11 cents to $2.65                           Down 18 cents to $2.17
Sirloin tip roast (1 lb.)      Up 10 cents to $3.72                           Up 20 cents to $3.27
Pork chops (1 lb.)             Up 22 cents to $3.41                           Down 1 cent to $3.09
Bacon (1 lb.)                     Up 24 cents to $3.44                           Up 37 cents to $3.03
Whole fryers (1 lb.)           Down 8 cents to $1.11                         Down 22 cents to $0.93
Whole milk (gallon)           Up 15 cents to $3.12                           Up 38 cents to $3.17
Cheddar cheese (1 lb.)     Down 10 cents to $3.69                      Up 58 cents to $4.13
Eggs (dozen)                     Up 33 cents to $1.51                           Up 34 cents to $1.35
Flour (5 lb.)                       Up 30 cents to $1.90                           Up 28 cents to $2.04
Corn oil (32 oz.)               Up 14 cents to $2.77                           Up 52 cents to $3.34
Vegetable oil (32 oz.)      Up 9 cents to $2.57                             Up 39 cents to $2.97
Mayonnaise (32 oz.)        Up 12 cents to $3.35                           Up 7 cents to $3.44
Cereal (10-oz. box)         Up 3 cents to $2.85                              Up 28 cents to $3.06
Bread (20-oz. loaf)          Down 9 cents to $1.49                          Up 16 cents to $1.28
TOTAL                            $41.34                                                     $40.69

Among the items that increased according to both the Indiana and national figures were eggs, flour, corn oil, vegetable oil and mayonnaise.

For the past several years, eggs have typically increased modestly in retail price from the fourth quarter of one year to the first quarter of the next, and this year is no different," Francl said. "Over the past six months or so, increased demand for grains, including soybeans, has resulted in higher purchase prices for processors. This in turn has led to higher retail prices for flour, corn oil, vegetable oil and mayonnaise."

It's quite common for the figures on Indiana's portion of survey to differ somewhat from the national survey, but it seldom happens that two surveys differ this much. While there can be legitimate differences in the cost of some food items from state to state or from one state to the nation as a whole, when there is this much difference, the reason probably comes down to plain old statistical variation, Francl said. When you make assumptions from just a few samples, as happened with the Indiana figures, odd things happen, Francl said.

"This does not mean that there are issues with either the data or the survey methodology, only that the reported numbers may be at the outside limits of the statistical variation," he said.

The share of the average food dollar that America's farm and ranch families receive has dropped over time, despite gradual increases in retail grocery prices.

In the mid-1970s, farmers received about one-third of consumer retail food expenditures on average. That figure has decreased steadily over time and is now just 22 percent, according to Agriculture Department statistics," Francl said.

Using that percentage across-the-board, the farmer's share of this quarter's $41.34 market basket total would be $9.09.

"There are countries in Europe that spend over 35 percent of their disposable income on food and some African countries spend in excess of 55 percent while it still takes less than 10 percent in the United States," said Isabella Chism, IFB 2nd vice president. "We are blessed to live in the country with the safest, most abundant and cheapest food supply."

AFBF, the nation's largest general farm organization, conducts its informal quarterly market basket survey as a tool to reflect retail food price trends. According to U. S. Department of Agriculture statistics, Americans spend just under 10 percent of their disposable income on food annually, the lowest average of any country in the world.

Source: Indiana Farm Bureau