Rocky Mountain News
06-15-07
Shoppers pinched at checkout lines
Food prices burden home budgets already squeezed at gas pump
By Joyzelle Davis
A basic breakfast of instant oatmeal costs 14 percent more than it did last year.
The coffee to wash it down is 4.9 percent more, and that splash of milk is up 3.9
percent.
In fact, the price of nearly everything that goes into a grocery cart at a Denver
supermarket is rising at the highest rate in years, further crimping household
budgets already grappling with record fuel costs. The average price for regular
gas in Colorado is 13 percent higher than last year.
Nationally, grocery prices in May were up 4.2 percent from the year earlier,
according to figures released Friday by the U.S. Department of Labor, and are
forecast to go higher. The increase in food prices is far ahead of the general rate
of inflation, which clocked in at 2.2 percent compared with last May.
"The prices for simple things like orange juice are sky high. Even bread is more
expensive," said Paula Sperry, a Wheat Ridge resident, as she loaded groceries
into her minivan outside a Safeway on Wadsworth Boulevard. "There are a lot of
things that I won't buy now unless they're on sale."
Prices are on the march for a couple of reasons, including freezes in California
and Florida that took out swaths of citrus, and food producers who are passing
along the higher gas costs to customers.
But one of the biggest reasons is the soaring cost of corn, which plays a role in
thousands of foods from feeding chickens to sweetening soda pop. Corn also is
used to make ethanol, an alternative fuel that's considered one of the most
promising ways to decrease dependence on foreign oil. That demand has
caused the price of corn to double in the past year, breaking through the $4 a
bushel barrier.
"Meats that are grain-fed - particularly poultry - are all having some kind of price
increase," said Kemper Isley, a co-owner of Vitamin Cottage. "There's definite
pricing pressure on commodities right now."
The price of corn alone has increased the grocery bill for the average American
by $47 since July, according to a study by Iowa State University. If ethanol
production climbs to 30 billion gallons a year by 2012, food prices likely will have
risen a total of $67 a year, the study said.
As corn prices soar, more farmers are enticed to switch their fields of wheat and
soybeans to corn. Scarcer supply of those grains is why cereal and bakery
products are up 4.5 percent nationwide compared with a year ago.
The price increases are particularly painful because most U.S. workers aren't
getting higher paychecks to make up the difference. A report from the Labor
Department last month showed that average weekly earnings for workers in
nonmanagement jobs fell 0.5 percent in April when inflation was taken into
account.
"The purchasing power of our wages hasn't increased," said James Pritchett, an
associate professor in Colorado State University's Department of Agricultural
Resource Economics. "Overall, consumers don't feel as wealthy as they did
before."
Americans still are in a better position than other countries to absorb an increase
in food prices, Pritchett said. U.S. consumers spend 11 percent of their wages on
food at home and in restaurants, compared with nearly 20 percent in Europe and
as much as 70 percent in the developing world.
But that doesn't mean the recent increases don't sting.
Colleen Croope and her husband have been cutting back on meals out, forgoing
fresh fruits and vegetables and even skipping a camping trip to offset the impact
of rising gas and grocery prices on her household budget.
"When gas prices go up, we seem to pay for it everywhere," the Thornton
resident said.
The recent run-up in food prices is particularly noticeable because they have
been relatively stable for several years, rising only 1.8 percent in all of 2006.
After years of holding the line, food companies, including Coca-Cola and Tyson
Foods, have announced price increases to improve profit margins.
The outlook isn't entirely bleak. Teri Gault, founder and chief executive of
TheGrocery Game.com, says she's noticed that manufacturers are offering
bigger coupons, such as a recent discount of $1.50 for Yuban coffee compared
with $1 last year, or $1 off Sara Lee poundcake, which is double last year's
coupon.
Food companies "are aware that prices have gone up, and they want people to
still try their products. That's what coupons are for," said Gault, whose online
service helps members maximize savings.
Pritchett, the Colorado State economics professor, also points out that prices for
fruits are starting to ease as farmers replace damaged crops. And the attractive
prices for other crops cause farmers to ramp up production, eventually bringing
more supply online.
"If you show the American farmer a high price, they're happy to produce to it," he
said.