Consumers feel heat from rising food prices / LJWorld.com

Archive for Sunday, July 8, 2007

By Kara McGuire - Star Tribune (Minneapolis)

July 8, 2007

Minneapolis — Rising gasoline prices have been getting all the attention, but the cost of another, more-important staple is actually rising even more: food.

In the past year, food prices have increased 3.7 percent and are on track to jump by as much as 7 percent by year's end. The current increase is more than double the 1.8 percent jump seen the year before, according to the consumer price index.

Meanwhile, gas prices rose 2.9 percent. Only the cost of health care rose more, and then just slightly.

While companies up and down the food chain see the increases, they're only beginning to pass them on to consumers. But with grilling season - meat prices particularly hurt - some consumers already are tweaking their spending habits. A recent study shows that more consumers are using coupons.

While food prices are rising pretty much across the board, items related to corn are affected the most. That's because increasing demand for ethanol, made from corn, is driving up corn prices, which farmers use to feed their poultry and cattle. The high price of corn also is affecting prices of everything from cereal and other products with corn as an ingredient to the oils used to make potato chips.

But corn is only one culprit. Higher labor, packaging and fuel costs all play a role. Bad weather in California and Florida was the main contributor to a 20 percent spike in citrus fruit prices as well as higher prices for some vegetables. A drought this summer could cause prices to rise even more than current projections.

"We should all hope we have a really good growing season this year," said Ben Senauer, co-director of the University of Minnesota's Food Industry Center.

Prices are rising in each grocery aisle. In April, eggs cost 18.6 percent more than a year ago. Whole chicken prices increased 7 percent. Bread is up nearly 6 percent and beefsteaks up 5.5 percent. Even watermelons cost more, according to Lund Food Holdings Inc., the Edina, Minn.-based owner of the Lunds and Byerly's chains. High corn prices pushed farmers to devote record acreage to corn this summer, leaving some crops in short supply.