Food prices rise 7 pct in 2008: farm group

WASHINGTON (Reuters) - Americans got a little relief at the supermarket over the holidays with grocery prices down 1 percent in three months, but the new year is not expected to bring steep price cuts, the largest U.S. farm group said on Wednesday.

An informal survey conducted by the American Farm Bureau Federation in October found the cost of 16 basic grocery items to be $48.19, down 49 cents from August but up 7 percent or $3.16 from the beginning of 2008.

"Despite the recent collapse in oil prices and steep declines in farm commodity prices, food prices have not yet declined significantly and may not for quite some time," Farm Bureau economist Jim Sartwelle said.

He added, "Sticky prices, once a somewhat obscure economic concept to most food consumers, are the new reality as we move into 2009."

"Sticky" is a term used in economics to describe a situation in which variables, such as wages or prices for goods, are resistant to change despite external forces.

Mayonnaise and toasted oat cereal showed the largest retail price increases in the fourth quarter, with a 32-oz. jar of mayonnaise up 30 cents at $3.57 and a 9-oz. box of toasted oat cereal increasing 16 cents to $3.13.

But food prices fell for 11 of the 16 items. Apples saw a 29 cent drop to $1.51 per pound, a five-lb bag of flour was down 16 cents to $2.46, cheddar cheese was down 15 cents to $4.76 per lb and bacon fell 14 cents to $3.37 per lb.

Sartwelle said ground chuck, sirloin tip roast and pork chops also dropped in price, reflecting "weakened retail demand for these meats during the end-of-year holidays."

"Whole milk is the only item in the basket that is less expensive now than it was during the same time in 2007," he said.

A half-gallon of whole milk was down 19 cents at $2.38 while a whole gallon fell 10 cents to $3.82.

A total of 133 volunteer shoppers in 37 states participated in the latest survey.

Sartwelle said grocery prices could moderate this year if economic turmoil continues globally, lowering demand for U.S. commodities.

The U.S. Agriculture Department recently lowered its food inflation forecast for 2009 by 0.5 percentage point to 4 percent. The department estimates food prices rose by 5.5 percent in 2008, the largest annual increase since 1990.

The Farm Bureau, which represents livestock and crop producers, said while retail food prices have risen over time, the share of each food dollar that returns to farmers and ranchers has decreased.

According to Sartwelle, farmers took home about one-third of the price consumers paid for grocery items during the mid-1970s. Now, that figure amounts to only 19 percent.

Of the $48.19 paid for the Farm Bureau's grocery basket of basics, just $9.16 would go to farmers.

(Reporting by Jasmin Melvin)