As food prices rise, shoppers changing habits

July 22, 2007|By SUE STOCK

RALEIGH, N.C. - Milk is $4 a gallon.

Cereal is $4 a box.

An orange for your lunchbox can run $1.50 or more.

Food prices are rising faster than they have in 17 years, and there's no relief in sight. Economists had expected a 4 percent increase this year - we reached that in May.

No one is predicting prices that will make you hit the panic button. But when you add the higher grocery bill to everything else that costs more - gas, utilities and medical care - it's an unwelcome change for most families.

To compensate, many consumers are making changes: Buying more generic products, switching to cheaper meats or simply cutting out some of the extras they normally buy.


Wake Forest, N.C., resident Margie Kishpaugh cares for her three children and three others she is watching for friends this summer. The six children go through a gallon of milk a day.

Kishpaugh has found ways to stretch her already-tight budget. She uses coupons, buys items on sale and stocks up on products when they are cheap.

"The last time it was on sale ... I must have bought at least 20 packages of chicken breasts," she said. "We eat chicken almost every day."

Chicken prices have risen, too, along with prices on everything from eggs to steaks.

Several factors are boosting costs. Blame bad weather in Florida for higher produce prices and blame higher oil and gas prices for just about everything else.

It takes energy to get food to the table, from fertilizing it to harvesting, packaging and transporting it. Manufacturers are passing those increases on to consumers.

Higher oil prices have had another consequence: There's a national push to boost production of ethanol, which is made from corn, as an alternative fuel. That in turn has increased the demand for corn and led to higher prices. The price of a bushel of corn nearly doubled - to $4 - from late 2005 to early 2007. Those increases have hit farmers who use corn as feed, cereal manufacturers and even soda makers (corn syrup is used as a sweetener).

There could be some relief on that front. At the end of June, the U.S. Department of Agriculture reported that the nation's farmers dedicated more acres than expected to growing corn - something that will help alleviate some of the pressure on the corn market.

However, that announcement had a negative side: More acres for corn means fewer acres of soybeans, wheat and other crops.

At first, manufacturers and retailers seemed to be absorbing the higher cost of corn and gas, but they were really just working through their inventory of already-made product, said Brian Todd, president of the Food Institute, a New Jersey group that studies food prices.

Cereal "has a longer shelf life, so it takes longer to filter through," he said.

Now, a box of cereal can easily cost $4.

At the end of June, cereal maker General Mills debuted new boxes for Cheerios, Chex and Wheaties. The prices are slightly lower, but the boxes shrank and the price per ounce went higher. General Mills spokeswoman Kirstie Foster would not say how much the prices increased, saying only that the percentage increase per ounce was "a low single-digit increase."

Foster said the company is responding to market conditions and competitors. Such changes might seem abrupt because so many products are affected. But historically it's not that bad, Todd said.

The last time the price of groceries went up more than 4 percent was 1990, when they rose 6.5 percent. But prices jumped as much as 16.4 percent in 1973 and 14.9 percent in 1974 when gas was in short supply.

In a survey released in May that focused on the effect of higher gas prices, consumers told the Food Marketing Institute that they were changing their behaviors. Sixty-nine percent said they are eating out less often, and 65 percent said they were purchasing fewer luxury items, institute spokesman Bill Greer said.

"Even high-income shoppers are giving that response as well," he said. "So it's cutting across income levels."

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