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Concerns Crop Up Over Rising Food Prices

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Aired 3/3/11

Rising food prices are about to take a bigger bite out of your budget, and the increased prices could be around for a while.

San Diego consumers have enjoyed relatively stable food prices over the past two years. But analysts are warning that’s about to change.

People shop in the meat aisle at a Fresh & Easy grocery store in Los Angeles, California.
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Above: People shop in the meat aisle at a Fresh & Easy grocery store in Los Angeles, California.

Shoppers can expect to pay 4 to 5 percent more for food in the coming months, according to Paul Lehman with the U.S. Department of Agriculture.

“We just need to be prepared for some additional costs coming up here. Hopefully the retailers, the food production industry, the farmers, consumers – we can all work through this cycle and keep the abundance of products there but keep the prices as low as we can at the same time,” said Lehman.

Global food prices have reached their highest point in 20 years and could increase further because of rising oil prices stemming from the unrest in Libya and the Mideast, a U.N. agency warned today.

The Food and Agriculture Organization of the United Nations (FAO) Food Price Index is a measure of the monthly change in international prices of a basket of food commodities.

Above: The Food and Agriculture Organization of the United Nations (FAO) Food Price Index is a measure of the monthly change in international prices of a basket of food commodities.

The USDA estimates global food prices rose 25 percent last year and set a record last month. World grain inventories are headed for a 13 percent decline before the next harvest, according to the USDA.

Global skyrocketing food prices have been among the triggers for protests in Egypt, Tunisia and elsewhere, and raised fears of a repeat of the food price crises in 2007 and 2008.

The main ingredients for the projected price hikes domestically are soaring gas and energy prices, significant crop losses, and the massive use of corn-based ethanol.

“As much as a third of our corn crop is getting turned into ethanol, and that corn isn’t available to feed animals or people or to be exported or anything else," said Dan Seiver, economist with the Finance Department at San Diego State University."And that certainly has pushed corn prices, which is a key international grain prices, higher than they would otherwise be."

The United States is the largest producer of corn in the world. Corn is grown on more than 400,000 U.S. farms.

The price of corn affects most food products in the grocery store. It's the main ingredient for cereals and snack foods, and corn syrup is used to sweeten soda and many other food items. Corn is also used to feed the cattle, pigs and chickens that fill the meat aisle.

Seiver said the rise in food prices should generate a larger supply of crops this year.

"And then prices should come back down next year," he explained. "But in the long run, unless we find ways to feed 9 billion people by the year 2050, food prices will be significantly higher."

The Associated Press contributed to the information in this report.

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