Miami Herald, FL
08-16-07
Rising food prices squeeze consumers
Food prices are going up -- and up. Global pressures and U.S. demand for some
products mean that costs aren't likely to go down anytime soon.
BY KEVIN G. HALL AND NIALA BOODHOO
nboodhoo@MiamiHerald.com
With whole milk costing 21 percent more than it did a year ago, Nereida Bernuth
has developed an eagle eye for sales.
''It's really hard,'' Bernuth, of Coral Springs, said of rising food prices -- milk in
particular. When she saw a gallon for $4.14 recently at Wal-Mart, she bought two
jugs and froze one. ''I imagine it's hard for families with little kids,'' she said.
It's not imagination at all. Labor Department inflation data released Wednesday
showed that U.S. food prices rose by 4.1 percent for the 12 months ending in
July. A deeper look at the numbers reveals prices of milk, eggs and other diet
essentials 30 percent higher in some cases.
Already stung by a two-year rise in gasoline prices, consumers now face sharply
higher prices for foods they can't do without. That may go a long way to
explaining why, despite healthy job statistics, Americans remain glum about the
economy.
Meeting with economic writers last week, President Bush dismissed polls that
show Americans down on the economy and expressed surprise that inflation is
one of the stated concerns.
But the numbers reveal the extent to which Americans are being pinched.
The Bureau of Labor Statistics said in its July inflation report that egg prices are
33.7 percent higher than in July 2006. Over the same period, according to the
department's consumer price index, whole milk was up 21.1 percent; fresh
chicken 8.4 percent; oranges 13.6 percent; dried beans 11.5 percent and white
bread 8.8 percent.
FIGURES BURIED
Because of falling prices for things bought at the mall -- computers, cameras,
clothing and shoes -- the food numbers get lost in the broader inflation rate for all
goods and services, which measured 2.4 percent for the same 12-month period.
Since people shop at the mall less often than at the grocery store, they're
constantly reminded of that.
In the Miami-Fort Lauderdale area, the cost of food and beverages rose 4.2
percent in June compared to the year before. The statistics bureau, which does
not provide details on local individual food costs, said the overall increase in food
and beverages prices was the largest in more than six years.
At a Publix supermarket Wednesday afternoon in Miami, Publix milk was $4.29 a
gallon, McArthur Dairy $6.25 a gallon and Stonyfield Farm organic $3.29 for a
half-gallon.
Why are food prices rising? The answer is complex.
It's partly because of corn prices, driven up by congressional mandates for
ethanol production, which have reduced corn available for animal feed. It's also
because of tougher immigration enforcement hurting the farm labor pool and a
late spring freeze damaging fruit and vegetable crops. And it's because of higher
diesel fuel costs to run tractors and attractive foreign markets that take U.S.
production.
The Labor Department's last detailed survey of consumer spending, in 2005,
showed that Americans spent about 12.8 percent of their income on food -- a bit
more than 7 percent at home, and 5.7 percent away from home.
These percentages suggest that higher food prices won't break the bank for
most.
In broad terms, the economy isn't terrible. Unemployment, nationally and in
South Florida, is near record lows, and the second quarter posted a strong 3.4
percent growth rate.
But for families below the median family income, about $56,000 nationally,
$45,200 in Miami-Dade and $58,400 in Broward, the food price increases hurt -particularly piled on top of large increases in homeowners' insurance and, for
some, property taxes.
Luna Cerruya, 49, of Coconut Creek, who recently took a part-time job as a
home healthcare aide to keep up, reports that once-a-year guests from her native
Brazil have remarked how much prices have gone up here.
Cerruya saves by opting for the cheapest brand.
''It's a nightmare,'' she said, shopping in the dairy aisle of her local Publix.
``People are telling me to move north.''
At the Al-Mara farm in Midland, Va., Jeff and Patty Leonard's 600 cows produce
19,000 pounds of milk a day. They plant about 1,000 acres of corn, so they don't
face all of the rising feed costs like some farmers. But they empathize with
consumers: The cost of nitrogen fertilizers and diesel fuel have all gone up
sharply, raising production costs by nearly 30 percent.
''That's how your farmer feels when we're trying to buy soybean meal, food for
our cows and trying to maintain our equipment,'' said Patty Leonard. ``I can
understand exactly what the shopper is going through.''
PRODUCTION COSTS
Milk prices aren't set on the farm. That's done by marketing cooperatives, which
this year have been successful in passing on higher production costs after
several dismal years of prices.
''It's pretty much a realignment of the actual value of milk in today's dollar,'' Patty
Leonard said. ``Milk has been cheap for a long, long time.''
Globalization also explains higher milk prices. Australia, a leading milk exporter,
is struggling through a drought, and European governments are pulling back
dairy subsidies. So U.S. farmers, aided by a weak dollar, are stepping in to meet
growing demand for milk products in China and India. That has limited the supply
at home and abroad, driving up prices.
''U.S. per capita dairy consumption is the highest it's been since 1987,'' said
Chris Galen, vice president of the National Milk Producers Federation.
``Americans are eating more cheese than ever.''
To make more milk to make cheese, or to raise more chickens that lay more
eggs, farmers need feed corn and other products. But corn prices have soared
over the past year as Congress pushes ethanol, a renewable fuel made from
corn. Fields that previously grew soybeans are now yielding corn, and that has
driven up the price of soybeans.
Iowa State University's Center for Agricultural and Rural Development
shocked the farm sector earlier this summer with a report that corn farmers are
expected to lock in prices of $4 a bushel through 2010, about double what corn
fetched two years ago.
''You will probably be seeing these prices rise for quite a long time and
stabilizing, maybe, but not going back to the $2-a-bushel corn,'' said Jacinto
Feitosa, co-director of the center in Ames, Iowa.
Kevin Hall is a reporter in the McClatchy Washington Bureau.