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Higher Prices Might Not Affect Main Holiday Course: Study

WEST LAFAYETTE, Ind. - Due to increasing energy costs and world food demands, Thanksgiving dinner overall is going to cost a little more than last year, said a Purdue University expert.

"Food prices in 2007 are up across the board," said agricultural economist Corinne Alexander. "What we've seen happen in 2007 is different from previous years. This year we're seeing food prices increase at a rate of 4.4 percent, which is well above the 10-year average of 2.6 percent. In general, food price inflation is lower than the rest of inflation, but this year that's changed," said Alexander.

On top of the overall increase, some food items have seen even larger price hikes. "There are a couple of items that have particularly high prices, like dairy," Alexander said. "Dairy prices are up 15 percent from last year, and that's fairly noticeable because a lot of people buy milk every week. Another food item that is up substantially is eggs," which are up 45 percent, said Alexander.

When it comes to the traditional main course, high demands worldwide are driving up wholesale turkey prices - a hike that, fortunately, consumers may never actually see.

"Turkey supplies are above last year's levels, but we're also seeing very strong export demand, and demand in general," Alexander said. "As a result, we're seeing wholesale prices for turkey increase slightly above last year's levels. The USDA currently predicts that turkey wholesale prices will be between 90 and 94 cents per pound."

Because retailers want consumers to purchase entire holiday meals in their stores, however, they are often willing to take a profit-loss on the traditional holiday bird. "Pricing for holiday turkeys, and whether or not that wholesale price will translate into a higher retail price, really depends on the individual retailer's pricing decisions," Alexander said.

"Turkeys are a favorite item for grocery stores to offer specials or coupons on to get consumers into the store so that they buy their turkey there and then do the rest of their holiday shopping there as well. So, depending on the individual retail store's pricing decision, consumers may or may not be paying more for turkey this year than last year."

In addition to increasing food prices, energy costs have risen as well, affecting consumers both directly and indirectly.

"Energy prices have been up for the last few years, and that increases the cost of manufacturing and transporting food," Alexander said. "As a result, we're seeing food retailers passing on these higher energy costs to consumers."

Energy costs aren't the only factors contributing to the rise in food costs. A worldwide wheat shortage has added to the cost of wheat-based foods.

"The world's wheat supplies are at the tightest level since the 1975-76 crop year, and of course the world's population has grown since the 1970s," Alexander said. "So, as a result, we're seeing prices for wheat products up as much as 10 percent."

Strong economic growth around the globe has resulted in higher demand for American agricultural products, which also contributes to the higher prices U.S. consumers will see this holiday season. "Economies around the world are growing, so people worldwide have more money to spend on food," Alexander said.
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