Modestly Higher Food Prices Seen for ’96 : Indicators: But cost of produce is likely to surge. Popularity of dining out is expected to grow.

Food prices will rise modestly in 1996 despite tight grain supplies, the U.S. Department of Agriculture said Thursday, but the cost of fresh fruits and vegetables will surge.

Food prices are likely to climb 2% to 4% during the new year, with abundant supplies of meat holding down overall food price inflation, the department said.

Some analysts disagreed, projecting increases of 4% to 5% because of this year’s small grain crops.

Americans spent about half their food dollars at restaurants and fast-food outlets this year, up sharply from 36% in 1991, the USDA said in its first forecast of 1996 food costs. Fierce competition among eateries “will keep price increases moderate in 1996,” the department said.

Jeff Nedelman of the Grocery Manufacturers of America said the trade group sees dining out as a growing trend.

Increasingly, shoppers want “meal solutions,” often ready-to-eat food or entire meals, Nedelman said, and stores are offering more prepared foods for sale.

“Overall, the outlook for retail food prices remains favorable for consumers in 1996,” economist Annette Clauson said in explaining the department’s forecast.

The consumer price index for food in 1996 is forecast to rise 2% to 4%, about the same as the 1995 forecast of 2.8%.

Fresh fruit and vegetable prices climbed 9.5% in 1995 and will climb 6% to 8% in 1996 chiefly because of larger exports, the department said.

Tight global grain supplies “may place some pressure on prepared foods,” Clauson wrote in the department’s Agricultural Outlook magazine.

But she said prices for cereals and bakery products should change negligibly.

Meat prices should be stable in 1996, Clauson said, with record output offsetting the effect of rising feed prices. Meat accounts for 12.7% of the overall food price index.

Private analyst John Schnittker said the department is behind the curve on its meat projections. Rather than pay high feed prices, farmers will send lighter-weight cattle and hogs to market, pulling down production.

“There’ll be less for the consumer and the price will have to ration it,” Schnittker said. “You can’t produce more meat in 1996 with something like 16% less corn to feed than we had the year before.”