The Bureau of Labor Statistics released the February Consumer Price Index report earlier today:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1 percent in February on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.1 percent before seasonal adjustment.

An increase in the food index accounted for more than half of the all items increase in February. The food index rose 0.4 percent in February, driven by a 0.5 percent increase in the index for food at home, with four of the six major grocery store food group indexes increasing. The energy index declined, with a decrease in the gasoline index more than offsetting sharp increases in the fuel oil and natural gas indexes.

The index for all items less food and energy also rose 0.1 percent in February. An increase of 0.2 percent in the shelter index was the major contributor to the rise, but the indexes for medical care, airline fares, personal care, recreation, and new vehicles also increased. In contrast, the indexes for household furnishings and operations, apparel, used cars and trucks, and tobacco all declined in February.

The seasonal adjustment on gasoline must be rather powerful. Here in southeast Wisconsin, the annual skyrocket of gasoline prices began just after February started, going from $3.15/gallon at the beginning of the month to $3.50/gallon by the end of the month.

Reuters noted that the “core CPI”, which strips out energy and food, did increase by 1.6% over the past 12 months. It, however, is well below the 2% inflation rate targeted by the Federal Reserve, with the measure watched by the Fed, the index of personal consumpition expenditures, even lower than that.

The Wall Street Journal reports that the inflation of food prices is both expected and long-term:

Surging prices for food staples from coffee to meat to vegetables are driving up the cost of groceries in the U.S., pinching consumers and companies that are still grappling with a sluggish economic recovery.

Federal forecasters estimate retail food prices will rise as much as 3.5% this year, the biggest annual increase in three years, as drought in parts of the U.S. and other producing regions drives up prices for many agricultural goods. The Bureau of Labor Statistics on Tuesday reported that food prices gained 0.4% in February from the previous month, the biggest increase since September 2011, as prices rose for meat, poultry, fish, dairy and eggs.

Globally, food inflation has been tame, but economists are watching for any signs of tighter supplies of key commodities such as wheat and rice that could push prices higher.

In the U.S., much of the rise in the food cost comes from higher meat and dairy prices, due in part to tight cattle supplies after years of drought in states such as Texas and California and rising milk demand from fast-growing Asian countries. But prices also are higher for fruits, vegetables, sugar and beverages, according to government data. In futures markets, coffee prices have soared so far this year more than 70%, hogs are up 42% on disease concerns and cocoa has climbed 12% on rising demand, particularly from emerging markets.

Drought in Brazil, the world’s largest producer of coffee, sugar and oranges, has increased coffee prices, while dry weather in Southeast Asia has boosted prices for cooking oils such as palm oil.

In a separate story, the WSJ notes that beef prices jumped by 4% in February, posting their largest 1-month jump since November 2003 and the foreign-only portion of the mad cow disease scare.

That 2.5%-3.5% prediction of food inflation, if it comes to fruition, would be the biggest jump since 2011’s 3.7%. The two-month 0.5% increase suggests a 3.0% increase, which would be right in the middle of the prediction spread.

Something is missing from the WSJ analysis of food inflation — the use of corn for fuel. Even though corn yields were better last year and the corn futures prices plummeted from their fall 2010-summer 2013 range, the futures prices are still significantly elevated compared to the longer historical trend.