RETAIL AND WHOLESALE FOOD PRICES CLIMB

JOANNA RAMEY

WASHINGTON (FNS) -- Pushed by rising dairy and meat costs, retail and wholesale food prices continue to swell.

However, several economists told SN they are sticking to a year-end and 1997 forecast of about a 4% increase, well above levels in 1995, when retail food prices increased 2% and wholesale food prices were up 1.9%.

Prices for food sold at grocery stores climbed a seasonally adjusted 0.5% in August vs. July levels, according to the Labor Department's monthly Consumer Price Index. Last month's food retail prices rose 3.6% compared with August 1995 figures, which at that time represented a 0.3% uptick for the month and a 2.5% increase over 12 months.

Wholesale food prices in August, according to the Producer Price Index, were up 1% for the month and rose 5.1% against year-ago levels. By comparison, wholesale food prices in August 1995 were unchanged for the month and up only 1.6% over the year. August PPI and CPI figures were reported this month.

Food prices have climbed steadily over the past few months. The hikes are largely pinned to poor grain crops, which have forced cutbacks in dairy herds and beef, swine and poultry stocks.

Annette Clauson, an economist with the U.S. Department of Agriculture, pegs the hike in retail food prices to be 2.8% to 3% for 1996 and 3% to 4% for 1997. "While we are expecting strong and higher retail prices for dairy through the end of the year, we're also expecting some price relief after the first of the year," she said.

Retail dairy prices were up 2% for August and 8.9% vs. year-ago levels. At wholesale, dairy prices rose 1.3% for the month and 14.6% vs. August 1995 figures. "Dairy prices are accelerating, and the PPI suggests there are other substantial increases in the pipeline at retail," said John Schnittker, senior economist with Public Voice for Food and Health Care Policy, a Washington-based advocacy group.

Schnittker noted that pork prices at the producer level in August rose 8.7% for the month and 26.4% over year-ago levels, while beef and veal prices rose 4.9% for the month and year. Such mounting wholesale prices will push retail food prices up at least 4% for 1996 and 5% for 1997, he said.

Don Ratajczak, director of the Georgia State University Economic Forecasting Center, Atlanta, predicts retail food prices to rise 4.5% for this year and 3.8% for next year.

Retailers likely will gradually pass along wholesale price hikes to shoppers, but at some point consumers will react by trimming purchases, Ratajczak and Schnittker said. For example, as dairy prices climb, shoppers may pull back on buying cheese and ice cream.

"The higher prices will eventually give you a consumer response, but at this point we don't see that happening yet," Ratajczak said.