Lower farm prices for major commodities such as milk, eggs and poultry will be a big factor in slowing the 1991 rise in consumer food costs, says an Agriculture Department economist.
"Larger supplies of (farm-produced) foods will have a strong influence on food prices in 1991," Ralph L. Parlett Jr. told the department's annual outlook conference on Wednesday."The farm value of food, that portion of the consumer dollar which goes to farmers, is expected to average nearly 6 percent below 1990," he said.
Parlett's comments followed the USDA's forecast on Tuesday that consumer food prices in 1991 would climb only 2 percent to 5 percent, compared to a 6 percent gain this year.
That 6 percent gain plus an increase of 5.8 percent in 1989 represent the sharpest back-to-back increases since an 8.6 percent jump in 1980 followed by a rise of 7.8 percent in 1981.
After that burst, food prices rose mostly at an annual rate of 2 percent to 4 percent - until the last two years.
Parlett said farm prices, costs of processing and distribution and consumer demand are the three major factors affecting food prices. And all have played a role this year.
"Farm prices were pushed up in 1990 because of tight supplies of some farm commodities," he said. "Costs beyond the farm gate for processing and distributing food increased about 7 percent, reflecting increased use of inputs and higher input prices."
Also, consumer demand for food remained relatively strong in the first half of 1990, although Parlett said decreasing real disposable income in the second half has probably dampened that demand.
Looking at the new forecast for 1991, Parlett said it involves a number of uncertainties about the general economy and the crisis in the Persian Gulf. But larger supplies of some commodities, including dairy products and poultry, will keep the overall price average from soaring.
"In any case, a slowdown of the economy will have a dampening effect on retail prices," he said. "Declines in personal income weaken consumer demand and reduces inflationary pressure on prices."
Parlett said higher oil prices "will have a limited effect on the costs of processing and distributing foods" next year.