Oil Price Increase Leads to Higher Food Costs

Rising costs for oil, raw farm products and labor are pushing food costs higher.

April 12, 2011

GAINESVILLE, FL - Retail food prices for the basics ?" milk, produce, cereal and coffee ?" have all increased, following a 3.9 percent wholesale food price increase from January through February, the largest increase in 36 years, the Gainesville Sun reports.

The rising price of oil is the most significant factor pushing food costs higher this spring, according to Bob Young, chief economist for the American Farm Bureau Federation.

Young said fuel transportation and energy costs contributed 44 percent of the recent retail food price increase. Those costs were pushed higher by a nearly 20 percent increase in gasoline prices and other oil-related items.

Additionally, the prices paid for raw farm products, such as vegetables, are another factor, making up 29 percent of the food price increase.

"We had frost this winter that reached all the way down into Mexico and affected crops like the leafy greens, but those prices are likely to begin coming down soon," Young said.

Labor costs are responsible for 19 percent of the food cost increase, and the remaining 8 percent is the result of increases in minor costs such as packaging.

According to the U.S. Energy Department??s Energy Information Administration, the average household will pay an extra $700 for gasoline this year.

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