The steady increase in the cost of food over the past year-and-a-half has been attributed to rising shipping prices and pressure on the US food markets, according to the Island's supermarket owners.

The food sector was the biggest contributor to the 12-month increase in the Consumer Price Index, with the average cost of food products climbing by 6.9 percent year-over-year.

The trend of monthly rises in the food sector has continued since January 2008, peaking at two percent in October 2008, with only four out of the past 17 months experiencing no or a minus change.

This was despite the annual rate of inflation reaching its lowest level of 1.4 percent since February 1977 and the cost of sectors such as fuel and power sector falling by 0.2 percent and transport and vehicles dropping by 10.7 percent in May 2009. Both sectors have declined continually from February 2009 onwards.

But despite the rising costs of grocery products, many restaurants have been freezing or discounting their prices or offering specials to their customers through the summer, Phil Barnett, owner of the Island Restaurant Group Ltd. saying his group of restaurants and a number of members of the Chamber of Commerce's Nightclub and Restaurant Division have kept their prices the same since mid-2008.

Zack Moniz, manager of Lindo's, said it was a case of supply and demand, with more people after less availability of products.

"It is down to supply and demand - shipping prices continue to rise - they have never gone down, and then we have got the pressures on the food markets in the US with grains and cereals and poultry - the prices continue to rise and that pressure increases," he said.

Mr. Moniz said the impact of the bird flu on China and Russia had seen millions of poultry culled to contain the disease, with the price of chicken going through the roof as a result of increased demand from aboard, particularly the US.

In addition, he said many US farmers had cut their production of grain, cereals, brans, corn and corn oil as the operating costs increased, some produce was used for animal feed and they produced more ethanol and other biofuel products instead, leading to a greater demand and driving up prices. "The demand is increasing and the prices are increasing," said Mr. Moniz.

"It is just one of those things - it is a vicious circle really."

On a monthly basis, food prices rose by 0.3 percent for May, with cereals up two percent, but beef and dairy products also climbed by 3.1 percent and 1.5 percent respectively.

But Mr. Moniz said that despite the perception that food prices were high, there was little room to adjust prices compared to other retail sectors. Lindo's was maintaining its price structure and absorbing rising energy costs, while passing on value for money to its customers, he added.

Tredick Gorham, president of Supermart, agreed the cost of food had been affected by inflation over the past few years, but pointed out that the monthly rise of 0.3 percent was significantly lower than June 2008, when it peaked for the year.

"There has been inflation in food in the last few years by a surprising amount of money, but it has been worldwide and I have a feel that it has been driven by commodities," he said.

"But it is clearly lower than it was a year ago. We have definitely noticed that it is slowing down and hopefully will continue to do so.

"It is clearly not a good thing what has been happening - we import everything, so it is clearly beyond our control."

This month, food prices fell for the first time since February, according to the United Nations' Food and Agriculture Organisation as the index of 55 foods dropped to 150 points in June, from 151 in May. In the US, the food and beverages index declined 0.2 percent in May, the same fall as in April, but was up 2.7 percent year-on-year, still significantly lower than the rise seen in Bermuda.

The largest drops were in the fruits and vegetables index, which fell one percent, and the index for meats, poultry, fish and eggs, which decreased 0.9 percent as the eggs index declined 6.5 percent. The index for dairy and related products fell 0.5 percent in May and has declined 5.6 percent over the past year.

Elsewhere, the indexes for cereals and bakery products, for non-alcoholic beverages, and for other food at home all posted slight decreases in May.

The food at home index has risen 1.5 percent over the last 12 months, the smallest increase since December 2006.

MarketPlace had not commented by press time.