Retail Food Prices Drop Slightly in Last Quarter of 2008

Retail food prices at the supermarket decreased slightly in the fourth quarter of 2008, according to the latest American Farm Bureau Federation Marketbasket Survey. The informal survey shows the total cost of 16 basic grocery items in the fourth quarter of 2008 was $48.19, down about 1 percent or 49 cents from the third quarter of 2008.

Of the 16 items surveyed, 11 decreased and five increased in average price compared to the 2008 third-quarter survey. The overall cost of the marketbasket items in the fourth quarter of 2008 increased by 7 percent compared to the first quarter of 2008, which tracks closely with the federal government’s Consumer Price Index for all food during a similar time period, according to AFBF.

Apples, flour, cheddar cheese and bacon showed the largest retail price decreases. Apples dropped 29 cents to $1.51 per pound; flour dropped 16 cents to $2.46 for a 5-pound bag; cheddar cheese decreased 15 cents to $4.76 per pound; and bacon decreased 14 cents per pound to $3.37.

Several survey items dropped in price by 10 cents or less: whole milk, down 10 cents to $3.82 per gallon; ground chuck, down 9 cents to $2.86 per pound; corn oil, down 8 cents to $3.55 for a 32-oz. bottle; pork chops, down 4 cents to $3.58 per pound; sirloin tip roast, down 4 cents to $3.94 per pound; vegetable oil, down 2 cents to $3.17 for a 32-oz. bottle; and a five-pound bag of potatoes, down 2 cents to $3.36.

“Reversing an upward trend over the prior three quarters, ground chuck and sirloin tip roast prices decreased during the fourth quarter,” said Jim Sartwelle, an AFBF economist. “These downward moves, along with the decrease in prices of our pork items, reflect weakened retail demand for these meats during the end-of-year holidays. Whole milk is the only item in the basket that is less expensive now than it was during the same time in 2007.Weakened export demand for U.S. milk products coupled with increased domestic milk production added up to lower milk prices at the grocery store.”

Although the slight decline in the overall cost of AFBF’s marketbasket of staple items provided some relief, consumers are not likely to be dancing with joy in the aisles of their local grocery stores in the near future.

“Despite the recent collapse in oil prices and steep declines in farm commodity prices, food prices have not yet declined significantly and may not for quite some time,” said Sartwelle. “Sticky prices, once a somewhat obscure economic concept to most food consumers, are the new reality as we move into 2009.”

However, if the new year brings lower global demand for U.S. commodities as the world economic turmoil continues, retail food prices may moderate somewhat, according to Sartwelle.

Mayonnaise increased in price for the fourth consecutive quarter, up 30 cents to $3.57 for a 32-oz. jar. Toasted oat cereal increased by 16 cents to $3.13 for a 9-oz. box. White bread increased 9 cents to $1.88 for a 20-oz. loaf. Large eggs increased 7 cents to $1.78 per dozen. Whole chicken fryers increased 2 cents per pound, to $1.45.

As retail grocery prices have increased gradually, the share of the average food dollar that America’s farm and ranch families receive has dropped over time.

“In the mid-1970s, farmers received about one-third of consumer retail food expenditures for food eaten at home and away from home, on average. That figure has decreased steadily over time and is now just 19 percent, according to Agriculture Department statistics,” Sartwelle said.

Using the “food at home and away from home” percentage across-the-board, the farmer’s share of this quarter’s $48.19 marketbasket total would be $9.16.

AFBF, the nation’s largest general farm organization, conducts its informal quarterly marketbasket survey as a tool to reflect retail food price trends. According to USDA statistics, Americans spend just under 10 percent of their disposable income on food annually, the lowest average of any country in the world. A total of 133 volunteer shoppers in 37 states participated in the latest survey, conducted during October.

Sidebar: Tracking Milk and Egg Trends

For the fourth quarter of 2008, shoppers reported the average price for a half-gallon of regular whole milk was $2.38, down 19 cents from the prior quarter. The average price for one gallon of regular whole milk was $3.82, down 10 cents. Comparing per-quart prices, the retail price for whole milk sold in gallon containers was about 25 percent lower compared to half-gallon containers, a typical volume discount long employed by retailers.

The average price for a half-gallon of rBST-free milk was $3.45, up 1 cent from the last quarter and nearly 45 percent higher than the reported retail price for a half-gallon of regular milk ($2.38).

The average price for a half-gallon of organic milk was $3.70, down 1 cent compared to the third quarter and approximately 55 percent higher than the reported retail price for a half-gallon of regular milk ($2.38).

Compared to a year ago (fourth quarter of 2007), the retail price for regular milk in gallon containers decreased by 2.5 percent while regular milk in half-gallon containers showed no change. The average retail price for rBST-free milk rose about 66 percent in a year’s time. The average retail price for organic milk in half-gallon containers went up throughout the year and was 13 percent higher in the fourth quarter of 2008 compared to a year ago.

For the fourth quarter of 2008, the average price for one dozen regular eggs was $1.78, up 7 cents compared to the last quarter. The average price for “cage-free” eggs increased 5 cents to $3.05 per dozen, around 70 percent more per dozen than regular eggs.

Regular eggs and “cage-free” eggs increased in retail price by about 10 percent between the fourth quarter of 2007 and the fourth quarter of 2008.