Drop in gas prices fails to spark equal plunge in cost of food

ECONOMIC NAVIGATION AND SIGHTSEEING

November 30, 2008|By JAY HANCOCK | JAY HANCOCK,jay.hancock@baltsun.com

Soaring energy costs were blamed for boosting food prices during the past few years, so you might think that plunging energy prices now would cause an equal decline for food.

But it's not happening.

I paid $1.87 for a gallon of gas last week and $3.57 for a gallon of milk. The gas was less than half what I was paying last summer. But the milk was down only moderately from the $4.20 range I remember from a few months ago.

This shows up in the official stats from the Labor Department. Consumer prices fell 1 percent in October while energy dropped 8.6 percent. Regular unleaded gas fell 14.2 percent. But overall food and beverage prices rose 0.3 percent. Milk dropped 1.8 percent.

Food prices rose partly because costs of more-expensive petroleum used for everything from tractor fuel to fertilizers and pesticides were passed along to consumers. U.S. farmers were also diverting corn supplies to ethanol distilleries, which made feed corn more expensive.

But there were other factors. A weak dollar boosted U.S. food exports. Developing nations such as China increased demand for meat. Bad weather in Europe and Australia hurt supplies. The dollar has strengthened lately, and the economic slump should reduce overseas demand.

Those factors along with cheaper energy should help household food budgets.

Good harvests would help even more.

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