Grocery prices surging
'Low inflation' doesn't consider food
By Marilyn Geewax
Cox News Service
Saturday, November 24, 2007
WASHINGTON -- Time and again this year, economists have assured consumers that the "core" inflation rate is tame, running at roughly 2 percent this year. President Bush agreed in September, saying, "inflation is low."
But millions of Americans now shopping for holiday meals will pay significantly more than in 2006. The government says food prices are up 4.4 percent compared with last year. That's about double the core rate, which excludes volatile food and energy prices.
And experts think the trend will get worse.
Economists don't like to consider monthly costs for fuel and food because those prices can rise and fall dramatically if a hurricane knocks out refineries or an early freeze kills crops.
Focusing only on the core rate is fine for people who will be spending the holidays studying economic statistics. But for Americans whose celebrations include a drive to grandma's house and a meal, inflation could have a big impact.
Gasoline is up 23 percent from last year, making the drive more costly. Christmas brunch may be an expensive treat too, given that bread is up 16 percent and coffee up nearly 10 percent. Better skip the orange juice; it's up almost 28 percent.
And all those jumps, as measured by the BLS in October, are mild compared with eggs. The wholesale price of a dozen grade A eggs was $1.35 in mid-November, up from about 89 cents last year, according to the U.S. Department of Agriculture.
"I keep looking for things I can buy with my discount card" from Giant Food Inc., said Mary Beth Thomas, a Rockville, Md., resident shopping for groceries on her income as a second-year teacher.
Consumers shouldn't look for any relief soon, said Mike Sheats, chief of poultry market news for USDA. "I believe that in the egg market, we have established a new price level" that likely won't come down, he said.
The same may be true for boneless, skinless chicken breasts, whose wholesale price is now up to $1.25 a pound from last year's 99 cents, he said.
Such price increases are a global problem, according to the Food and Agriculture Organization. Earlier this month, the United Nations agency issued its Food Outlook for 2007, and said that in September, food prices around the globe were up about 37 percent from the same month a year ago. Basic foods such as bread, pasta, meat and milk are seeing the biggest jumps, the report said.
Most price increases are tied to pressures being created by soaring energy costs, which aren't likely to drop dramatically. Expensive fuel translates into high costs for transporting food, making fertilizer and running processing plants.
In addition, recent hikes in oil prices have increased the demand for biofuels, sending up the price of corn used in ethanol and soybeans used for biodiesel. Corn and soy are used widely as animal feed, so that drives up the cost of poultry, meat and dairy products.
Another factor is rising consumer demand from China. As people in that developing economy become wealthier, they are buying more meat, eggs and other foods, driving up prices around the world. "China has been a big customer for us," Sheats said.
The FAO report concluded that with high energy prices and growing demand for food, consumers everywhere would see a "persistent upward trend in international prices of most agricultural commodities."
Many Americans are starting to adjust their eating and buying habits to reflect this new price environment. "We are buying less meat and using more coupons," Katherine Doyle, a social worker in Bethesda, Md., said as she entered the Giant grocery store.
FOOD PRICES RISING QUICKLY IN 2007 ...
Change from year earlier:
Jan., 2.4 percent
Feb., 3.1
March, 3.3
April, 3.7
May, 3.9
June, 4.0
July, 4.1
Aug., 4.2
Sept., 4.4
Oct., 4.4
... AFTER YEARS OF MODERATE GROWTH
2002, 1.8 percent
2003, 2.1
2004, 3.4
2005, 2.5
2006, 2.4
