Inflation Fears Linger Despite Falling Food Costs

Around the world, food prices dipped down a little lower in the month of April after steady increases in the first quarter of 2012, according to the United Nation's food agency.

However, experts warn that soybean supplies are tight so prices are currently higher than they've been since July of 2008. This phenomena will push corn prices up as well. Looking at the current trends and recalling the uprisings in the Middle East and North Africa after record high food costs last February, fears of inflation are on the rise...

According to the Bureau of Labor Statistics, food prices spiked up by 3.9 percent in February 2012 when compared to February 2011.

However, since February 2011, these eight popular food items have actually seen a decline in price:

• Lettuce - down 30.1%
• Cabbage - down 26.7%
  
• Tomatoes – down 21.8%
• Broccoli – down 18.9%
• Strawberries – down 15.6%
• Oranges - down 13.9%
• Peppers – down 12.3%
• Bologna – down 11.8%
• Lemon – down 11.1%

Reuters reports:

The index drop reflected a 2.5 percent month-on-month fall in maize prices, a 1 percent fall in wheat and a 5 percent drop in sugar prices, which offset a 2.2 percent rise in vegetable oils fuelled by soaring soybean prices.

"You would see prices most likely remaining under downward pressure in the next couple of months," the FAO's senior economist and grain analyst Abdolreza Abbassian told Reuters, adding that weather remained a critical factor.

Because of more expensive oil, increased demand from Asia, and poor weather, food prices actually increased around the globe, said the World Bank.

Soybean futures in the U.S. –greatly contributing to the overall international grain markets – have been greatly affected by the surging Chinese purchases.

Meanwhile, international wheat prices for the remainder of this year into 2013 are expected to end up at a lower yearly average than last year in lieu of a decrease in crops and stocks which can be attributed to a decrease in consumption and an increase in export supplies.

Experts also expect cereals output to reach a record of 2.371 billion tonnes within the year; an increase of 1.1 percent. Course grains will rise about 3.7 percent, up to 1.207 billion tonnes because of corn's increased output: 916 million tonnes.

To get a better idea of what food inflation has look like since 1980, take a look at this food price index:

*Image courtesy of Mongabay.