November 15, 2005

Bountiful harvest to keep holiday food prices lower

WEST LAFAYETTE, Ind. - Abundant supplies of many food products that were scarce last year may help Hoosiers enjoy a bountiful holiday season this year, said a Purdue University agricultural economist.

"One of the reasons for the small food price increases this year is that dairy and beef prices are much lower than last year," said Corinne Alexander, author of the university's annual holiday food prices report. "There also will be adequate supplies of the holiday favorite, turkeys."

Even with production slightly above last year's levels, wholesale turkey prices are above last year's level, Alexander said. Whether the higher wholesale prices will translate into higher retail prices depend on retailer pricing decisions.

"Turkey often is priced as a loss-leader, and many stores feature turkeys at below cost or offer special prices for frequent shoppers," she said.

The actual price you pay will depend on the type of turkey purchased. Most stores offer free-range and organic turkeys at premium prices, and fresh birds are priced higher than frozen birds.

"The price of fresh birds is more sensitive to increases in wholesale prices," Alexander said.

The outlook for other holiday meal ingredients is mixed.

Shoppers will see higher prices for oranges, grapefruits and potatoes. Early estimates indicate that hurricane Wilma damaged approximately 17 percent of Florida's citrus crop, and white potato acreage is at a record low this year. As a result, potato prices are up about 8 percent.

On the other hand, Cranberry supplies will be up about 5 percent from last year, and sweet potato supplies should be adequate due to higher yields in North Carolina, resulting in steady prices, Alexander said.

Prices in the dairy sector declined 1.2 percent, with an 8 percent drop in butter prices and 0.5 percent decline in whole milk prices. Beef and veal prices have been falling since May and are only 0.5 percent higher than last year.

Overall grocery store food prices are increasing at 2.1 percent this year, but grocery store price increases are smaller than restaurant price increases, which went up by 3 percent, Alexander said.

"Food shoppers are seeing some relief at the grocery stores, which is good news when they are faced with higher gasoline and energy prices this holiday season," she said. "The major cost increases are in the energy sector, so it will cost more to prepare and cook Thanksgiving dinner this year."

Natural gas prices are 25 percent higher than last autumn, electricity prices are 7 percent higher, and the trip to grandma's house will be more expensive this year.

"We will be paying about 55 percent more for gasoline to travel this holiday," Alexander said.

Writer: Kay Hagen, (765) 494-6682, kjh@purdue.edu

Source: Corinne Alexander, (765) 494-4249, cealexan@purdue.edu

Ag Communications: (765) 494-2722;
Beth Forbes, forbes@purdue.edu
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