As prices for commodities of all types have shot up in recent months, food prices have stayed relatively stable. But that will change next year, according to the latest forecast released by the U.S. Department of Agriculture.
Overall food prices will likely rise by as much as three percent, while prices for dairy could go up by more than 5 percent, and prices for meat by more than 3 percent.
Several food companies, including General Mills and Kraft, have said they would raise prices, and at least one restaurant chain — McDonald's — has said menu items will rise, too.
The expected increases come after a period of relatively low food prices. Following a rise in 2008, prices have been sliding. The agriculture department's Consumer Price index showed six consecutive months of declines in food prices from September 2009 to February of this year, a decline that hasn't occurred in 50 years.
But the rise in commodity prices has changed the picture.
"Although inflation has been relatively week for most of 2009 and 2010, higher commodity and energy prices are now exerting pressure on wholesale and retail food prices," the department said in its monthly report, released this week. "Hence, food inflation is predicted to accelerate during the final months of 2010 and the first half of 2011, leading to a forecast of 2 to 3 percent food price inflation in 2011."
Certain food items are significantly more expensive than at this point last year. Prices for beef are up nearly 6 percent over last September, while egg prices have jumped 11 percent and milk, 6.5 percent.
The price of corn, wheat and soy have shot up in recent months, as overseas demand has strengthened with a weak dollar and supplies have tightened following drought and fire in Russia.
U.S. export sales of corn more than doubled in the week ended Oct. 21 from a week earlier, and wheat sales climbed 5.3 percent, the Department of Agriculture said Thursday.
Analysts expect that projections for price increases could climb even higher in coming months as manufacturers start to factor in higher commodity prices.
Bloomberg News contributed to this story.


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