World Demand for Food
There is a growing demand for food around the world with the emergence of a middle class in such places as China, Latin America, Africa and the Middle East. With more disposable income, these people demand more and a greater variety of food. These middle classes will likely continue to increase, placing more pressure on world food prices.
The Lowly Dollar
The dollar has fallen against other world currencies over the past year. When the dollar goes down in value against other currencies, any dollar-denominated commodity tends to go up in price.
Part of the huge increase in oil prices can be attributed to the fall of the value of the dollar against other currencies. In the same way, most major food commodities are traded in dollars, which makes foreign-produced food more expensive.
Hidden Price Increases
Normally, food manufacturers would be hard-pressed to increase food prices further if they had already raised prices with their increased costs from oil. There is always fear among food manufacturers when they must raise prices that doing so will cause a decline in the amount they can sell. One way around this that manufacturers have been using is that instead of raising the price marked on the product, they simply place less into the package. Many people don't notice the change so they don't lose as much in sales.
Having done this, food manufacturers still have room to raise the actual prices where they would have been much more reluctant to do so if they had previously raised prices the same way.
