Food prices eat deeper into wallets
First gas, now food. The household budget in Southern California is getting no relief these days.
Southland residents already pay among the highest grocery prices in the nation, and the forecast is for even higher costs. Federal statistics released Tuesday for April show that food prices in Southern California rose 5.7% from a year earlier.
Prices are going up for much of what gets dumped into the grocery cart including cereals, bread, bacon, pork roasts, chicken, eggs, cookies, hot dogs, oranges, soda pop and dried beans.
Nationally, food prices rose 3.9% in April compared with the same month in 2006, and the outlook is equally chilling wherever you shop. It is happening for many reasons: inflation, drought, freezing weather, even the rising cost of corn -- highly sought after not only as ingredients for thousands of food products but also to make ethanol.
Food prices in 2007 are increasing at their highest rate in years.
“We are going to see grocery store prices show one of the most rapid increases in the last 15 years or so,” said Patrick Jackman, an economist at the U.S. Bureau of Labor Statistics.
That’s no surprise in Southern California, where high gas prices, real estate expenses and labor costs give grocery prices an extra -- and painful -- boost. Just ask Wendy Diamond, a Long Beach mother of three, who lives it.
After Diamond loaded her children into a minivan recently, she pulled out a box of Ralphs Chocolate Marshmallow Cosmos breakfast cereal from her shopping bag.
“I would have bought Lucky Charms, but it was $4.59,” she said. “This was $2.50.” Diamond said that nearly every product she purchases at that Ralphs or at a nearby Pavilions has gone up at least 20 to 30 cents in the last year.
This year, food prices in Southern California have been rising faster than other major cities, including such high-cost metropolitan regions as New York, Chicago and the San Francisco Bay Area, according to the Bureau of Labor Statistics.
Grocery store food bills rose by an average of 4.9% during the first four months of this year in Southern California. That contrasts with increases of 1.1% in each of the last two full years.
A year ago shoppers saw decreases for some items, including breakfast cereals, beef roasts, pork, chicken, cheese and olives, but about the only foods showing any drops in price this year are butter, bananas and frozen vegetables.
Prices vary from store to store and are hard to compare, but the increases over the last year are hard to miss on the shelves of Southern California supermarkets.
The base price for milk in California is up 30% from a year earlier. Nationally, milk is up 3.2%.
The price of a pound of oranges in Southern California has jumped nearly 75% to more than $1. Nationally, they have climbed 34.1%.
A 1-pound package of ground beef at Ralphs has risen 16% to $2.89 in the last year, according to TheGroceryGame.com, which tracks prices. Nationally, ground beef is up 2.7%.
Twelve ounces of Tyson Frozen Chicken Nuggets at Ralphs are $4.59, up 18% from about a year ago. Chicken is up 5.5% nationally.
A box of Kraft Macaroni & Cheese at the supermarket chain is 25% more than a year ago, while the price of a 34.5-ounce container of Folger’s coffee is up 30 cents to $9.69. Nationally, the price of coffee rose 4.9% in April compared with a year earlier, government data showed.
At Vons, red seedless grapes are up 17% from about a year ago to $3.49 a pound.
“Pretty much everything is going up,” said shopper Kim Snow of Long Beach.
Diamond, the Ralphs shopper in Long Beach, now buys more house brands such as the cereal, has cut soda pop from her budget and makes bread and ice cream at home.
Even so, Diamond figures the monthly food bill for her family of six -- a husband, three children and a grandparent -- has risen by $100 to $400 from a year ago.
Hard freezes in California, Florida and other southern states are one contributor to the rapid increase in prices, especially for produce, but that’s easing as farmers plant new vegetable crops to replace what was damaged.
The real problem, according to food manufacturers and supermarket executives, is the run up in fuel prices and the cost of grain, which has soared as an ever-growing amount of corn is diverted to make ethanol to mix with gasoline.
“Corn prices have moved up significantly as demand for ethanol taps supplies ... which will impact overall inflation levels throughout the year,” Jeff Noddle, chief executive of Supervalu Inc., reported to shareholders last month. Supervalu owns Albertsons.
The price of a bushel of corn has jumped 46% to $3.66 over the last 12 months and earlier this year topped $4, according to DTN, an Omaha-based agriculture information firm.
“It has been a remarkable run,” said Michael Swanson, an agricultural economist at Wells Fargo & Co.
Swanson said corn was the culprit for his estimate that food inflation will reach the 4% to 4.5% range this year, the highest since 1990.
That’s because corn is the building block for much of the American food supply.
It is what dairy cows eat to make milk and hens consume to lay eggs. It fattens cattle, hogs and chickens before slaughter -- depending on the animal it takes 2.5 pounds to 6 pounds of feed corn to produce a pound of meat. Corn syrup is the third-largest ingredient in Heinz ketchup and is the sweetener that goes into soda pop and hundreds of other food items.
Corn also is the building block of the 7 billion gallons of ethanol made in the U.S. this year, a figure that is on its way to 14 billion gallons by 2011, according to estimates by Iowa State University.
“We are going to see phenomenal growth” in the amount of corn going into ethanol, said Bruce Babcock, an economist who directs the Center for Agricultural and Rural Development at Iowa State.
Ethanol now gobbles 18% of the domestic corn supply, up from 10% in 2002, Babcock said.
The growth of ethanol production is spurred by its status as a renewable fuel and a 51-cent-a-gallon tax credit for buyers who then blend it with gasoline.
As farmers discover just how golden corn has become, they are replanting fields formerly devoted to wheat, soy and other foods with corn, driving up the price of even more food commodities. Soy is up 28% to $7.41 a bushel from May 2006, DTN said.
Meanwhile, smaller-than-expected crops in the U.S. and Australia have pushed the price of wheat up 22% to $4.80 a bushel from a year ago. That’s why shoppers are paying more for bread and other baked goods.
At the same time, food companies “are getting more aggressive” about raising prices to improve profit margins, said Burt Flickinger III, managing director of consulting firm Strategic Resources Group.
Major manufacturers pushing through price increases include Coca Cola Co., Kraft Foods Inc. Kellogg Co., Hershey Co. and Tyson Foods Inc.
Prices are going to continue to rise in coming months as companies such as Tyson, one of the nation’s largest providers of beef, pork and chicken, pass what they are paying for corn down the food chain to consumers, said Richard Bond, the company’s chief executive.
Tyson will pay a third more, or $300 million, for corn and grain this year, Bond said at an April 30 news conference. “Most people couldn’t stand this type of grain increase without some form of price increase.”
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Comparisons in the grocery aisle
Food prices are increasing at their highest rate in years. A look at the cost of some products in a sampling of Southern California supermarkets:
Yoplait yogurt smoothie, 8 oz.
2006 price: $1.50
2007 price: $1.69
Kraft Macaroni & Cheese, 7.25 oz.
2006 price: $1.00
2007 price: $1.25
Folger’s coffee, 34.5 oz.
2006 price: $9.39
2007 price: $9.69
Red seedless grapes, 1 lb.
2006 price: $2.99
2007 price: $3.49
2006 price: $2.75
2007 price: $2.99
Quaker instant oatmeal, 42 oz.
2006 price: $4.19
2007 price: $4.78
Sources: TheGroceryGame.com, U.S. Department of Labor
Strategies for saving
With food prices rising at their fastest rate in years, shoppers can soften the blow by comparison shopping and by being coupon-savvy, said Teri Gault, founder and chief executive of TheGroceryGame.com, a Santa Clarita-based online subscription service that helps consumers optimize savings from coupons.
“Use a coupon, wait for a good sale and stockpile everything but produce and milk,” Gault advised.
She also recommends stashing away about one item, such as toothpaste or pasta sauce, per family member.
Traditional grocery stores such as Albertsons, Ralphs and Vons usually put two or three categories of food on sale every week and follow that cycle for most of the year, Gault said.
So with a bit a planning, smart consumers can stock up on products when they are on sale and when there’s a good coupon available, Gault said.
Her website tracks which products are on sale at given chains and what coupons are being published, which usually are inserted in the Sunday edition of local newspapers.
-- Jerry Hirsch