Food industry says prices headed up again in '08

By Rene Pastor

WASHINGTON (Reuters) - Americans who dug deeper into their pockets for groceries last year will face sticker shock again this year when shopping for food, experts said on Thursday.

"There's going to be real food inflation in this country," C. Larry Pope, president and chief executive of U.S. beef processor Smithfield Foods Inc., said at the U.S. Agriculture Department's annual outlook conference.

Prices of grain futures have surged lately. For example, wheat futures have more than doubled on the Chicago Board of Trade over the last 12 months. Pope said meat shoppers eventually will pay for the rally because farmers who raise livestock cannot absorb the sharp escalation in feed costs.

Pope said the rip-roaring rallies in corn, soybeans and wheat would be good for farmers, but are "scary" for companies like Smithfield and the rest of the livestock industry.

"I think we need to tell the American consumer that things are going up," he said in a speech. "We're seeing cost increases that we've never seen in our business."

USDA Chief Economist Joseph Glauber forecast that consumer food prices would rise 3.0 to 4.0 percent this year after a similar 4.0 percent hike in 2007.

He added that "overall retail food prices for 2008 to 2010 are expected to rise faster than the general inflation rate."

The spike in grains prices stems partly from the growing biofuels industry, especially manufacturers of corn-based ethanol.  Continued...