First decline in U.S. food prices since 1967-Gov't

First decline in U.S. food prices since 1967-Gov't
Thu Dec 10, 2009 5:17pm EST

WASHINGTON, Dec 10 (Reuters) - U.S. food prices will rise by a scant 2 percent this year, posting the first decline in the year-on-year rate of increase in four decades, an Agriculture Department official said on Thursday.

The rate decline, due to the economic slowdown that hit a year ago, follows a 5.5 percent surge in food prices in 2008, the largest increase in two decades.

Ephraim Leibtag, USDA's food price forecaster, said sustained downturns in prices for beef, pork, milk, fresh vegetables and fresh fruit would result in the first year-on-year decline in food inflation since 1967.

"It's going to be hard to see more than 2 percent in 2009," he said, with one month left to record.

Economic recovery in 2010 will bring a 3-4 percent increase in food prices due to higher demand.

Leibtag said food prices would hold steady during the early months of the new year and then rise moderately. The largest gains would come in seafood, fruits and vegetables. Beef and pork would rise by less than 2 percent.

"Right now, the factors are not in place to repeat what we saw in 2008," Leibtag said during a Reuters Insider interview.

If the widely forecast recovery falters, food demand would slip and food prices would show little gain in 2010, he said.

U.S. food prices usually are in line with the overall inflation rate. They soared by 4 percent in 2007 and by 5.5 percent in 2008 as crop and energy prices climbed worldwide and harvests fell short in some regions. (Reporting by Charles Abbott; editing by Jim Marshall)