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Lean times for grocery shoppers

• Cost of food rising - thanks to ever-skyrocketing oil prices

Posted: June 15, 2008 1:34 a.m.
Updated: August 16, 2008 5:02 a.m.

Food prices have risen 4.5% between February 2007 and February 2008 - about twice typical annual increase, the U.S. Department of Agriculture reports. With gas prices continuing to rise and Midwest flooding, food costs are expected to continue increasing through this autumn.

 

The pincer of skyrocketing gasoline prices and rising food prices has the American family in a vise, many economists say.

A report from the Labor Department released Friday puts energy prices rising at a 16.5 percent annual rate in 2008, with food expenses on the increase at a 6.3 percent annual rate, up from a 4.9 percent increase over all of last year.

"It really sucks, between this and high gas prices," Stevenson Ranch resident Jennifer Cooney said as she left Vons in Stevenson Ranch with two bags of groceries last week. "There's nothing you can do."

The Labor Department report says higher food prices reflect a 1.5 percent jump in beef costs, the biggest rise in 13 months, and another steep increase in cereal and bakery products, which were up 1.6 percent.

About a year ago, amid reports of rising food costs, The Signal went comparison shopping at several local supermarkets. Last week we returned to four major chain stores, discovering prices were indeed up at most stores on sampled family staples, including meat, macaroni and cheese, breakfast pastries, bread, milk and coffee, as well as on wine.

At Albertsons, for example, the price for a pound of ground beef jumped from $1.99 in 2007 to $3.79 in 2008, while the price for milk at Vons rose from $3.99 in 2007 to $4.59 last week.

But increases weren't across the board. A pound of bananas was actually cheaper at Ralphs compared to a year ago, dropping from 99 cents to 77 cents. Also at Ralphs, a pound of ground beef was actually ten cents cheaper this year than last, and the jump in the price of whole fresh chicken was considerably less than that for beef.

Bucking the Labor Department statistics, Wal-Mart's superstore in Centre Pointe Parkway showed a decline in the price of many items over last year, including ground beef, large grade AA eggs and Vitamin D whole milk.

A change in habits

Just as higher gasoline prices are prompting drivers to get out of their cars and board buses or trains, higher food prices are changing shoppers' habits, said Dave Heylen, spokesman for the California Grocers Association.

"We are seeing a shift in the consumer behavior," Heylen said.

Along with not buying as much, Heylen said, grocery shoppers are perhaps not buying more expensive cuts of meat, high-end products and luxuries like wine.

At the same time, Heylen said, grocers are seeing some increase in traffic to their stores. He believes this is because people aren't eating out at restaurants as much, instead preparing their meals at home.

"We are seeing the consumer do more to stretch their dollar," he said.

Cooney, the Stevenson Ranch residents, says she now shops a few times a week so she can pay in smaller increments.

The Signal price survey shows many supermarkets' club cards result in substantial savings for shoppers. Among The Signal's selected items at the Albertsons on Copper Hill Drive, shoppers would save a dollar on wine, 50 cents on milk and nearly a dollar a loaf on bread - if they bought two loaves - by using their Albertsons club card.

Why the increase?

The increase in food prices can be blamed on several issues, including a higher demand for corn, a shortage of commodities around the world, and the sharp rise in energy costs, experts said.

"One problem is that corn has been used to produce ethanol," said Jack Kyser, chief economist for the Los Angeles County Economic Development Corporation.

With corn diverted to biofuel production, there's less of it to feed chicken, cattle and pork, driving up the price of meat.

Adding to worries about corn prices is the flooding in parts of Iowa, creating concerns that much of the corn crop has been washed away, Kyser said.

In addition, energy and diesel costs and the price of fertilizer, which is often made from oil, are on the rise, Kyser said. Trucks that deliver groceries to stories run on diesel, which has gone up in price even more than gasoline.

Heylen said the higher energy costs are impacting the entire food distribution system.

"It starts from the farm and goes to the fork," he said.

The high food prices also relate to international issues, like the long-term drought in Australia, climate-related issues and the decline of the U.S. dollar internationally, he said.

"Then you have this whole issue of emerging increased demand in the foreign markets," he said, adding that China is seeing a larger middle class that is "wanting better and more goods."

As for the grocers association, which represents 500 grocery companies that operate 6,000 stores in California, Heylen said its members have tried to absorb prices, but with ongoing increases grocers have been forced to raise prices.

"With razor-thin profits, we don't have an option," he said.

Heylen said grocers typically see a profit from 1 percent to 3 percent.

Kyser said increasing food prices have a widespread impact besides the obvious one - families' food bills. "Don't forget restaurants," he said.

School districts, which run buses on diesel and serve meals to their students, are experiencing the pincer effect on a larger scale than households, he noted.

Any relief in sight?

"We have to watch what happens," Kyser said. "A lot of nations are looking at the production of their food costs."

But saving costs on production won't happen overnight, he said,

Signal staff writers Katherine Geyer and Jim Holt, online editor Stephen K. Peeples and editor Lila Littlejohn contributed to this report.

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