Higher Prices Heading to the Grocery Shelf : Snack Foods, Vegetables, Salad Oils Likely to Rise

The latest government figures on wholesale prices foretell higher prices on the grocery shelves for items such as corn chips, pasta, salad oil and non-dairy creamers.

Already, there are some signs of rising prices.

A comparison by The Times of supermarket grocery ads in mid-July, 1987, and this week showed some spot price increases.

A national brand of corn chips was advertised at sharply higher prices this week: $1.59 for a 16-ounce bag that cost just $1.29 in mid-July of last year. A package of 36 corn tortillas that cost 69 cents a year ago was advertised for 79 cents this week.

But The Times’ comparison showed no definitive pricing trend.

While cattle and hog prices have fallen sharply--as feed-grain shortages led many producers to slaughter their animals early, producing a short-term glut--those decreases have yet to reach the retail market. A T-bone steak advertised at $2.49 a pound last July 16 is featured at some markets this week at $2.79, while beef stew offered at $2.19 a pound last July is available for $1.89 in some markets.

Most Vulnerable Items

Economists who track food-pricing trends emphasize that increases in the supermarket should be modest and specific to products derived from the food grains and oil seeds being destroyed by the prolonged hot and dry weather in the nation’s Farm Belt.

Even so, consumers are likely to feel the effects when they go grocery shopping. The Bureau of Labor Statistics reported Friday that the wholesale cost of “finished food” products--farmers’ crops transformed into macaroni, snack foods and even non-dairy creamers--increased 1.1% in mid-June, when the bureau collected its data, compared to a 0.9% rise in May. But farm prices were up 4.4%, the largest monthly increase in 2 1/2 years. That included a 25.3% increase for wheat, 24.3% for corn and 22.8% for turkeys.

While the drought has grown by a month since that reading was taken, the U.S. Department of Agriculture so far has added just one percentage point to its forecast for increased food prices this year. Before the drought, USDA economists projected a rise of from 2% to 4% for 1988, which was increased this week to 3% to 5%.

“We’re not talking about great increases here,” emphasized USDA economist Ralph Parlett. “We’re only talking one percentage point--and that’s a worst case.”

Interviews with economists and food wholesalers pinpoint these as the grocery items most vulnerable to price shocks from this year’s drought:

- Anything containing corn--including such snack foods as corn chips in all their brands and permutations.

- Scores of products that contain soy meal or soybean oil--from margarines and salad oils to non-dairy creamers, bakery goods and tofu.

- Canned vegetables, especially green peas, because the important Midwest canning crop is 50% to 70% of normal.

- Beef and pork prices. Prices paid to farmers fell in June as animals were slaughtered early. The glut is likely to be short-term, followed by smaller supplies late this year or early next year.

- California-grown fruits and vegetables. Called on to fill shortages elsewhere, they already are enjoying higher than normal seasonal prices, falling less than usual in summer.

“Anytime something we grow in California gets hit back East, they call on us for it,” said Shelley Machock, a spokesman for the Certified Grocers of California, a Los Angeles-based food wholesaler. “Then the supply diminishes and the price shoots right up.”

“Our people tell me that it’s still pretty much too early to tell (the effects of the drought),” said Machock of Certified Grocers, which is owned by independent supermarkets and such regional chains as Boys, Gelson’s and Irvine Ranch Market. “A lot of this is very ‘iffy’ because we don’t know yet how badly supplies are going to be affected in the East.”

Stacy Kottman, a Georgia State University economist, said the full impact of the drought, “particularly if it persists,” won’t be felt until 1989.

“Until this week we could say, ‘Well, if we get some rain, we’ll probably be all right,’ ” Kottman said. “But this is the last week we can say that.”

Economist Joseph Uhl of Purdue’s School of Agriculture in Indiana said California may hold the key to the longer-term effect of the Midwest drought.

“California is going to be a real help to us this year, especially in the produce area,” Uhl explained. “I hope that can work again next year, but I’m not really confident that it will be able to. Unless you get a good snowpack this year, your yields will be significantly cut in 1989. Then we’d really see the increases in food prices.”

The California Department of Food and Agriculture reported this week that California’s overall production this year will be large, though 5% less than last year--mainly due to smaller yields from non-irrigated pastures and ranges. While the state has had two straight years of subnormal snowfall and rainfall, stored water reserves are considered adequate to meet irrigation needs this year, the state said.