Rising food prices not expected to largely affect U.S. consumers

Shopper browses vegetable display

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JEREMY HOBSON: A new report out from the World Bank says global food prices have hit dangerous levels. They've jumped 29 percent in the past year and the World Bank says the increasing cost of food has sent 44 million people into poverty. The situation is especially bad in developing countries. But what about the impact of rising food prices here in the U.S.?

Here's Marketplace's Jeff Tyler.


JEFF TYLER: In developing countries, poor people often spend more than half of their income on food. So when prices rise even a little, it can have a big impact. The situation is different here in the U.S.

Dan Basse is president of Ag Resource Company, an economic consulting firm. He says Americans only spend about 10 percent of their disposable income on food.

DAN BASSE: So if it goes up one or two percentage points in disposable income, maybe we have to cut back in a few areas. But it really doesn't change our style of life.

He expects food prices in the U.S. will rise 3 to 4 percent this year. That's partly due to global demand from India and China. Also, ethanol deserves some of the blame. It consumes almost half of America's corn. But Basse says ethanol also accounts for about 10 percent of our fuel supply.

BASSE: Ultimately, eliminating ethanol would cause gasoline prices to rise, we estimate about 70 cents a gallon.

He says a spike at the gas pump would be harder on American consumers than the moderate increases expected at the grocery store.

I'm Jeff Tyler for Marketplace.

About the author

Jeff Tyler is a reporter for Marketplace’s Los Angeles bureau, where he reports on issues related to immigration and Latin America.

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