Quad-Cities Online, IL
05-27-07
Grocery hikes: Surge in food prices stands out
By Stephen Elliott, selliott@qconline.com
The shopping cart rolls through the bright aisles of the local grocery store.
The shopper might already be a little disconcerted if he or she just came from a
gas pump. Now, food prices are rising, and it’s more of a shock to the wallet.
Shoppers like Angie Rasmussen, Rock Island, have experienced this feeling of
paying more for less.
Last week, Ms. Rasmussen and her two children, Abbi, 4, and Aden, 3, headed
to the noontime farmers’ market in downtown Davenport. It's just another option,
she said, as higher grocery prices squeeze her budget.
"I don't feel I'm getting as much for my dollar," Ms. Rasmussen said of her recent
grocery store trip. "Chicken has gone up quite a bit, which is not good. I use it a
lot."
She said it means looking a little closer for better savings.
It's a scenario playing out across America.
Food prices over the first four months of 2007 have jumped at rates not seen
since 1980.
Patrick Jackman, an economist at the U.S. Bureau of Labor Statistics in
Washington, D.C., said grocery store food prices rose 7.5 percent between
January and April.
The last time the United States saw grocery hikes anything close to that was in
1989, when food prices went up 6.2 percent over a 12-month period. In 1980, the
increase over a 12-month period was 10.5 percent.
"Over the last several years, increases in grocery store food prices have been
relatively small," Mr. Jackman said. "This year stands out in contrast."
Mr. Jackman said the reasons are numerous. Freezes impacted citrus fruits and
a number of other vegetables. The demand for ethanol has caused the price of
corn to increase, and consequently, animal-feed costs are up.
"Your pork and beef prices have risen fairly sharply" as a result, he said.
In April 2006, the average grocery shopper would look at a finely wrapped piece
of choice beef and see a retail price of $3.97 per pound. A year later, the shopper
would see that same slab of beef go for $4.27 a pound.
Chris Friesleben, spokeswoman for HyVee Inc., in West Des Moines, said the
price increases mean shoppers may skip buying treats, like ice cream.
"Everybody needs to buy food," Ms. Friesleben said. "When the food budget is
tight, it forces (consumers) to make decisions on what they put in the basket."
Besides fuel costs and demand for corn, other factors have been percolating for
years and contribute to the current food price spikes.
"We've seen a steady increase in beef prices beginning in about 1998," said Bill
Bullard, CEO of R-Calf USA, of Billings, Mont. "From 1994 to 2002, we saw
122,000 cattle producers exit the industry because it wasn't profitable.
"Today, we have widely dispersed independent farmers and ranchers competing
against highly concentrated, politically and economically powerful meatpackers of
this industry," he said. "It's a real challenge to level the playing field."
Mr. Bullard was in Geneseo last fall to talk to local cattle farmers. Last week, he
was traveling to Washington, D.C., from Billings to speak with government
officials.
"In the cattle industry, the largest four firms control over 80 percent of the cattle
sold on an annual basis in the U.S.," Mr. Bullard said. "It's pretty much
unprecedented. That has been detrimental to both producers and consumers."
Most of these cattle are fed corn. The price of corn has been at record highs this
spring, selling, at times, around $4 a bushel. One of the reasons why corn is
selling at record prices is because of the demand for it in making ethanol.
A study released this month by the Center for Agricultural and Rural
Development at Iowa State University estimated increased corn prices driven
by ethanol demand have increased U.S. retail food prices by $14 billion annually.
Fred Greiner, president and chief operating officer of Fareway Stores Inc.,
Boone, Iowa, said shoppers are now trying to make their pennies go further. His
stores, noted for low prices and an excellent meat counter, have tried to keep
prices down, he said.
"It all goes back for ethanol raising the demand for corn," Mr. Greiner said. "In
turn, the cattle feeding on corn means the price of meat has gone up. It's the
same thing in the poultry industry.
"That, in turn, affects retail pricing. The heavy usage of corn syrup in products is
going to cause some inflation. The price of fuel affects the cost of shipping
goods," he said. "We try to find ways to cut expenses in other areas and maintain
the same price on the product in our stores."