Asked and Answered: Lower fuel prices don't translate into lower food prices

• Supply plays key role in food prices; beef shortage is an example

Question from Jerry: Hello, I'm curious. If food prices increased because of high oil/gasoline prices, why then have they not decreased when their initial argument was no longer valid?

Answer: Not too long ago "Arizona Republic" business reporter Ryan Randazzo answered a similar "Asked and Answered" question on why gas prices dropped last fall and if they were going to stay low into the near future. He explained that we have experienced low oil prices mainly because of a great deal of "oil production in the Middle East and, increasingly, the U.S., coupled with low global demand." Randazzo added that even as gas prices will rise a bit throughout the spring, we will most likely pay around $1.00 less a gallon than the average of 2014.

I reconnected with Ryan to look into this question from Jerry regarding the correlation between food and gas prices. After some research on the topic, this is what he found:

Fuel does represent one of the biggest expenses for farmers, contributing to the price of food. However, lower fuel prices don't automatically translate to lower food prices. The Arizona Farm Bureau tracks grocery prices every three months. During their December survey, when they purchased the same 16 basic grocery items they purchase each quarter, they found prices were up about 4 percent from the previous quarter. Some foods, like chicken, apples, milk and potatoes, had declined in price.

But sirloin roasts, bacon, ground beef and other products had risen in price. Marketing expert Julie Murphree said that beef prices have been high because of limited supply, and that doesn't get solved when gas prices are low.

"We should see meat prices remain high," she said.

While it's easy to meet the demand of foods like chicken relatively quickly because those animals grow fast, the beef shortage will take longer because it takes about two years to raise a steer and bring it to market, she said.

And of course, gas prices already are rising from the lows they reached this winter.

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