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Grocery Prices Getting Fat
(Blamed On Ethanol Demand, Weak Dollar)

12:33 PM CDT on Monday, March 10, 2008
From Staff and Wire Reports

Hungry for a chicken sandwich with sliced tomatoes washed down with a tall glass of milk? Prepare to fork over more money.

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Throughout the grocery store, food prices are higher � brought on by forces as disparate as drought in Australia and demand for ethanol.

U.S. retail chicken prices in January were up 10 percent compared with a year before, while whole milk was up at least 20 percent and tomatoes 25 percent, according to the Bureau of Labor statistics.

Bread was up 5.4 percent nationally. Skyrocketing wheat prices mean higher flour prices, which means everything from pizza crust to cake are likely to see a price hike in the coming months.

And that side of egg salad? Not cheap. Eggs gained more than 30 percent.

"It just looks like everything's going up," said retiree Vivian Goodson, who was shopping recently in the Houston area. "Every time I go to the store, it seems like things are up a few pennies more."

Escalating food costs could present a greater problem than soaring oil prices for the national economy because the average household spends three times as much for food as for gasoline. Food accounts for about 13 percent of household spending, compared with about 4 percent for gas.

And consumers spending more on food have less disposable income to spend on items that keep retailers happy � from electronics to dining out. Food prices are rising while home values fall and the stock market falters � all of which can shake consumer confidence.

"It's the biggest risk we face economically, and it might be the thing that does us in," said Rich Yamarone, director of economic research at Argus Research Corp. in New York. "There's nothing really worse than having a job, making money and forking most of it over just so you can have the same amount of food. You're running in place, and it really weighs on you."

Many analysts expect consumers to keep paying more for food. Wholesale food prices, an indicator of where supermarket prices are headed, rose last month at the fastest rate since 2003, with egg prices jumping 60 percent from a year ago, pasta products 30 percent and fruits and vegetables 20 percent, according to the Labor Department.

A whole shopping basket of factors are combining to make a trip to the market more costly.

Higher fuel prices make it costlier to grow crops and get them to market. Corn, a key foodstuff for farm animals, has shot up as ethanol demand increases. Corn prices have more than doubled in commodity markets over two years, and soybeans nearly tripled, according to DTN, a commodities-analysis firm in Omaha, Neb.

Soybean farmers, lured by higher margins, are growing more corn, causing soybean supplies to shrink and prices to increase, said Ephraim Leibtag, an economist at the U.S. Department of Agriculture's economic research service.

"The biggest factors have to do with the ever-increasing demand for food products combined with the weak dollar," Mr. Leibtag said.

In 2005, wheat averaged $3.50 to $4 per bushel on commodities markets, he said. By December, the price was $7.75, and in January it was $8.55. Futures markets predict a further increase.

Corn inflation has translated to higher meat prices. Meanwhile, China and India are eating more meat, and a drought in Australia has limited grain and dairy exports to Europe and Asia, cutting the global supply and prompting more countries to turn to the U.S. for food, said Joe Outlaw, an agricultural-economics professor at Texas A&M University.

"Generally, nobody sees it coming back down anytime soon," he said. And if there are problems � a drought or otherwise � with this summer's harvest, it will only get worse.

"The bakers haven't seen anything if we have a drought," he said.

Overall, the Department of Agriculture forecasts food prices will gain about 4 percent this year, faster than in recent years. The price hikes are enough to take a lot of the comfort out of comfort food.


Staff writer Karen Robinson-Jacobs and The Boston Globe and Houston Chronicle contributed to this report.

A PRICIER SHOPPING BAG
Families are feeling the pinch of rising food prices. Among the highest:

Bread: Up 5.4%

Eggs: Up 30%

Tomatoes: Up 25%

http://www.dallasnews.com/sharedcontent/dws/bus/stories/031008dnnatnufoodprices.3c19156.html?npc&nTar&ybz