Consumers and farmers alike are being pinched by continued high retail food prices at a time when farm commodity prices have dropped dramatically.

According to the latest informal food price survey from the American Farm Bureau Federation, retail food prices increased in the third quarter of this year by about 4 percent from the middle of the year. The survey found that the total cost of 16 basic grocery items was $48.68. The overall cost of the 16 items had increased about 10.5 percent from a year ago.

Yet the price for corn delivered this December on the Chicago Board of Trade dropped by 50 percent in recent months, from a high of $7.96 a bushel to $3.86 a bushel on Oct. 22. Similar price drops occurred for other grain and dairy products. Retail food prices remain high because it takes a while for change to ripple through the food production system, according to Dr. Darrell Good, a farm economist at the University of Illinois. Good said food costs usually trail big swings in commodity prices by weeks or even months.

But that's not helping consumers now, and it's not helping farmers either.

"Many producers have had to pre-pay their input costs at the higher fuel prices we had last summer. And their business plan was based on much higher income projections, before commodity prices tumbled," explained Jonah Bowles, agricultural risk management coordinator for the Virginia Farm Bureau Federation.

While opponents of the 2008 Farm Bill claimed it was a budget buster and President Bush vetoed it once, Bowles said the bill's safety net payments for farmers are inadequate for producers in today's market situation.

"Keep in mind, those high commodity prices we saw last summer came with a downside-record high energy prices. So the farmer's profit margin was as thin as before. And now he's paying the same energy costs, but market prices are way down."

A recent dramatic drop in world oil and fertilizer prices might help eventually, Bowles said, but again it takes time for those changes to ripple through the system.

While higher consumer food costs might have leveled off, there's not much hope for retail food prices to drop anytime soon, according to Jim Sartwelle, an AFBF economist.

"There is no good reason to expect any huge price movement from this point, but there is less reason to expect to see a return anytime in the near future back to prices we enjoyed mainly from 2000 to 2006," Sartwelle said.

VAFB News Release