Food, Energy Lead PPI Declines

WASHINGTON — The Producer Price Index for Finished Goods fell almost 1% between July 2008 and July 2009, led by a 29.7% decline for energy goods and a 4.2% decline in prices for consumer foods, according to the U.S. Bureau of Labor Statistics. By contrast, the index for goods other than food and energy rose 2.6%.

Many key perishables categories experienced steep declines on the index during the past year, with dairy products falling almost 20%, eggs declining 16.5%, beef, veal and pork down more slightly more than 16%, fresh fruits and melons down 12.5%, fresh and dry vegetables falling 7.5% and processed turkeys declining 3.7%. The PPI for processed chickens and bakery products rose 4.3% and 2.5%, respectively.

Seeing energy and food prices fall in tandem is no surprise. During the past three years, rising energy costs didn't just impact the transportation and production costs of farmers and food processors.

They also inflated production costs for chemical fertilizers and led to rising ethanol prices, which, along with federal production mandates, diverted corn away from food processors and animal feed producers, and diverted acreage away from crops including wheat and soybeans, raising prices on those commodities as well.

In other positive signs for food producers, the PPI for flour has fallen 23.1% since July 2008, and prepared animal feeds have fallen almost 12% in seasonally unadjusted terms.