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Published: Wednesday, 4/27/2011

Cost of food may climb 4.4% by end of this year

Analyst places blame on depleted stockpiles

BLOOMBERG NEWS
The cost of living in the United States rose at its fastest pace since December, 2009 in the 12 months ended in March. The cost of living in the United States rose at its fastest pace since December, 2009 in the 12 months ended in March.
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Global food prices may rise 4.4 percent to a record by the end of the year, adding to costs that mean inflation is accelerating from the United States to China, according to an analyst.

The United Nations' Food Price Index may climb to 240 points from 229.84 last month, said William Adams, a fund manager at Zurich-based Resilience AG.

According to U.S. Department of Agriculture estimates, demand for ethanol is shrinking global corn stockpiles the most in seven years, inventories of nine edible oils will drop to the lowest since 1974, and U.S. beef stocks will be the smallest since 1999.

"The stockpiles are being severely depleted," said Mr. Adams, who correctly forecast gains in heating oil and gasoline prices last year. "Eventually it gets to the consumer. The U.S. government isn't subsidizing pork chops like it is ethanol."

The cost of living in the United States rose at its fastest pace since December, 2009, in the 12 months ended in March. Chinese consumer prices rose last month by the most since 2008.

The United Nations' food-price index, which covers 55 commodities, reached an all-time high of 236.8 points in February, before dropping by about 3 percent in March. The next report is scheduled for May 5.

The gains increase costs for consumers, but they also mean U.S. farmers, the world's biggest agricultural exporters, will earn a record $94.7 billion this year, the Agriculture Department estimates.

"There are not a lot of opportunities like this for farmers," Mr. Adams said. "Raw materials are actually at a premium, so this is their moment."

Janet Yellen, vice chairman of the Federal Reserve Board, said April 11 that higher food and fuel costs will have only a temporary impact on inflation and the gains do not warrant a reversal of record monetary stimulus.



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