A customer looks at milk on display at JJ&F Market in Palo Alto, Calif., Wednesday, Aug. 20, 2008. Food inflation is here to stay, or at least for a while. That's because retail prices for cereal, eggs, cheese and meat generally lag those set in international futures markets by several months or longer.
Chicken, left, and seafood, right, on display at JJ&F Market in Palo Alto, Calif., Wednesday, Aug. 20, 2008. Some food items may come down modestly as commodities prices cool off; others might not budge a cent and some may actually increase.
Several cheeses on display at JJ&F Market in Palo Alto, Calif., Wednesday, Aug. 20, 2008. "Food prices tend to go up pretty quickly and they tend to stick on the way down," said Jim Sartwelle, an economist with the American Farm Bureau, which tracks retail food prices on a quarterly basis.
A customer purchases milk at JJ&F Market in Palo Alto, Calif., Wednesday, Aug. 20, 2008. In the U.S., retail food prices have jumped on average 6 percent this year -- triple the normal inflation rate of around 2 percent -- as soaring demand for grains coupled with severe weather around the globe battered crops and sent world prices for rice, flour and other staples soaring.
Eggs and butter on display at JJ&F Market in Palo Alto, Calif., Wednesday, Aug. 20, 2008. Food manufacturers have dealt with higher costs in a variety of ways, from raising retail prices to shrinking boxes of cereal and bags of potato chips so they can sell less product for the same price.
Lean ground chuck on display at JJ&F Market in Palo Alto, Calif., Wednesday, Aug. 20, 2008. Looking ahead, economists see a mixed bag for American consumers. While falling grain prices should slow the rate of increases for baked goods, people can expect to pay more for other items like beef, pork and chicken because as grain markets took off, the cost of corn- and soybean-based animal feed skyrocketed.
Chickens on display at JJ&F Market in Palo Alto, Calif., Wednesday, Aug. 20, 2008. Another factor keeping food prices high: Though commodities prices have fallen from record levels, they're still well above historical levels. Corn and soybeans have dropped 24 percent and 17 percent, respectively, in the last two months but are still about double where they were two years ago.
A grocery cart of eggs, fruits and vegetables is shown at JJ&F Market in Palo Alto, Calif., Wednesday, Aug. 20, 2008. The economics of the food business are partly to blame for the higher prices. While crude oil is the main ingredient of gasoline, processed foods like cereal, crackers or cookies use only a small amount of corn, wheat and other grains, limiting manufacturers' pricing power.