Food Prices Rising Sharply

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The U.S. Department of Agriculture reported today that January agricultural product prices received by farmers rose 9% in January compared with December prices. Prices were 15% higher than in January 2012. The prices paid index (i.e., the cost of producing the crops) rose 1.4% above the December index and is up 5.2% compared with January 2012.

Producers received higher prices for lettuce, cattle and corn, and lower prices for milk, eggs and wheat. Costs rose for rent, nitrogen fertilizer and other services, while falling for diesel fuel, interest and mixed fertilizer.

Food prices paid by consumers will be going up, due in part to continued drought conditions in some of the country’s most productive farmland and due in part rising costs. The rising farm price index does not predict that inflation will zoom up, but it is one indicator that consumers will be squeezed again to decide whether to buy something to eat or that new electronic gizmo. Food usually wins, and the effect on the economy is (usually temporarily) not good.

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