Food prices get no help from cheaper grains, oil

WASHINGTON (Reuters) - U.S. food prices are still headed for their largest increase in two decades this year despite the recent slide in oil and grain markets, the Agriculture Department said on Tuesday.

In its monthly report, USDA did not change its forecast for food prices, which are expected to surge by 5.5 percent in 2008 and 4.5 percent next year. It would be the third year in a row when food prices rose by at least 4 percent.

Reuters obtained a copy of the report that will be released formally on Friday.

Poultry estimates for 2008 were revised higher to an increase of 4.5 percent and fruits and vegetables 7 percent, both up 0.5 percent from the September estimate. Consumers spend 8.4 cents of each food dollar on fruits and vegetables and 2.3 cents on poultry.

USDA said the remaining price forecasts by food categories are unchanged from the prior month in both 2008 and 2009. This year alone meats, poultry and fish are forecast to rise 3.5 percent, eggs 14 percent and dairy products 8.5 percent.

USDA economist Ephraim Leibtag, who prepared the forecast, said there were no changes in the 2009 estimate because it's "too early to tell where commodity prices will end up."

Food prices have soared during the last year led by wild swings in the commodity market and energy costs that are passed on to consumers.

As worries about a global recession escalate, commodity prices, which reached record highs earlier this year, have plunged. The drop, however, has failed to show up on grocery stores shelves.

Last week alone, wheat fell to a 16-month low of $5.43 a bushel, soybeans neared a 14-month low of $8.25 a bushel, and corn dropped to $3.71 a bushel, marking its lowest point in almost a year.

The cost of energy -- used to transport, package and process foods -- is still boosting food prices, even though energy prices have dropped significantly. Oil has slumped from a record high above $147 a barrel on July 11 to about $70.

Americans spend more than $1 trillion a year on groceries, snacks, carry-out food and meals in restaurants. Farmers get 20 cents of the food dollar and the rest goes to processing, labor, transportation and distribution.

An informal, 32-state survey of prices conducted in August by the American Farm Bureau Federation found its grocery basket of basics such as milk, bread, cooking oil and ground chuck cost $48.68, up 4 percent or $2.01, from May.

In the past 12 months, said AFBF, the cost of its food basket jumped about 10.5 percent.

(Editing by Christian Wiessner)