Retail prices for food at U.S. supermarkets dropped about 4 percent in the fourth quarter of 2004, retracting most of the increase recorded in the third quarter, according to the latest American Farm Bureau Federation marketbasket survey.

The informal survey on the total cost of 16 basic grocery items showed a decrease of $1.51 from the 2004 third quarter survey, the group said. The third quarter average price for the marketbasket items was $1.53 higher than the second quarter.

The $38.87 average paid by volunteer shoppers for the 16 items is $1.44 higher than the 2003 fourth quarter survey average of $37.43, the release said.

Reversing an upward trend in price that began during the first quarter, bacon showed the largest decrease, down 41 cents a pound to $3.11, followed by Russet potatoes, which dropped 31 cents per five-pound bag to $1.75, the AFBF said. The price for a gallon of whole milk dropped for the second consecutive quarter, ending at $2.98, a 25-cent drop from the third quarter.

Cheddar cheese dropped 18 cents a pound, showing the lowest average price in a year at $3.76, the release said. The price for a dozen eggs and a pound of apples also dropped 18 cents, to $.99 and $1.04 respectively.

Other items that decreased in price:
-Flour, down 16 cents per 5-pound bag, to $1.46;
-Pork chops, down 14 cents per pound, to $3.29;
-Whole fryers, down 14 cents per pound, to $1.14;
-Sirloin tip roast, down 4 cents per pound, to $3.70; and
-Vegetable oil, down 4 cents per 32-oz. jar, to $2.52.

"The decline in meat and milk prices is due to a couple of different factors working concurrently," said AFBF Senior Economist Terry Francl. "First, there has been an increase in the supply of beef - production rose 2 percent from a year earlier in the fourth quarter. At the same time, reduced demand for meat products became a factor, due to a weakening of the high-protein diet craze which has gripped the country over the last year or so."

After dropping 12 cents in the third quarter, the price for a 20-ounce loaf of bread increased 15 cents to $1.44. Corn oil increased in price, rising 11 cents to $2.78 per 32-ounce jar, the survey said. Toasted oat cereal increased 11 cents, rising to $3.07 for a 10-ounce box.

Ground chuck averaged $2.57 per pound, a nine-cent increase from the third quarter and the first rise in price in a year. Mayonnaise increased to $3.27 per 32-ounce jar, a four-cent rise.

Despite steady increases in grocery store average prices over time, the share of the average food dollar received by America's farm and ranch families has actually dropped. "This reflects a long-standing trend," said Francl. "Thirty years ago farmers received about one-third of consumer retail food expenditures."

According to the most recent Agriculture Department statistics, U.S. farmers and ranchers receive just 19 cents out of every dollar spent for food. Using that across-the-board percentage, the farmer's share of this quarter's marketbasket average total would be about $7.39.

Francl said increases in off-farm costs, which account for 81 cents of the retail food dollar, reflect the higher cost of energy as well as health and retirement benefits. "These are more likely correlated with the overall inflation rate in the general economy," Francl said.

Source: AgPRonline