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Price of eggs and other items has jumped more than 17 percent since 2006
Published on Friday, Mar 21, 2008
When Jennifer Paljich picked up a few cartons of eggs to dye for Easter on her recent trip to Giant Eagle in Green, she had sticker shock. They were two for $5 on sale.
The Manchester mother of four doesn't buy eggs often because her kids are cereal-eaters.
''I thought, that's really pretty expensive for eggs. It was the carton with a dozen and a half, but that's still kind of pricey,'' she said. ''Eggs have really gone up. I didn't realize because I don't buy them all the time.''
The eggs that will grace many area tables this Easter Sunday came at a much higher price than last year — 69 percent higher, according to a Beacon Journal survey of local food prices. A dozen eggs went up from an average of $1.32 to $2.23 over the past 16 months.
Eggs aren't the only thing that's costing a lot more.
When compared to prices from a Beacon Journal survey conducted in November 2006, average prices have gone up more than 17 percent on 30 staple grocery items. Other dramatic increases include:
• 5-pound bag of flour, up 76 percent.
• 100-ounce bottle of laundry detergent, up 81 percent.
• Four-pack of toilet paper, up 67 percent.
• Packaged American cheese singles, up 39 percent.
• Box of crackers, up 35 percent.
• 12-pack of cola, up 23 percent.
All of the increases have combined to jack up the cost of our basket of staples by more than $10, according to the survey.
The rising prices aren't going to stop anytime soon, according to Ephraim Leibtag, an economist with the Economic Research Service for the U.S. Department of Agriculture.
Grocery costs, which typically increase 2.5 percent each year, grew by 4 percent in 2007, and are expected to go up another 4 percent to 5 percent this year, Leibtag said. Energy and commodity costs are
the reason.
''Corn, wheat and soybeans, the three largest commodities, are all at or near record highs. That means higher meat prices, grain prices, oil and fat prices,'' Leibtag said.
He said the 16-month snapshot from Akron reflects the kind of increases that are being seen across the country — the highest jump in food prices nationally since 1990.
Current increases, however, are different from most in the past, because they are affecting basics — bread, milk and eggs.
''This is very different from what we've seen in the last 25 years. In fact, the price of basic foods, staples, were always flat. We paid more for specialty items, add-ons, conveniences, not the basic raw ingredients. Now the basics are more expensive,'' Leibtag said.
When the price of staples rise, middle- and upper-income consumers may have to adjust their discretionary spending, ''but for lower-income houses, this is a real problem,'' he said.
Rethinking budgets
Leibtag's words reflect reality for Tallmadge resident Bernice Spiga. The 80-year-old is living on Social Security since her husband died. With $600 in fixed monthly expenses, including utilities, car insurance, homeowner's insurance and medical insurance, Spiga said food costs are really eating into what's left.
''It's ridiculous. Eggs! I can't believe the price of eggs,'' she said. On a recent trip to the Ellet IGA, Spiga reached for a six-pack of eggs instead of a dozen to spend less. She also goes from store to store looking for the best deals each week.
Combined with the high price of gasoline for her car, Spiga said she's had to eliminate entertainment from her budget to make ends meet. ''I can't go to Mountaineer and gamble,'' she said.
Following Spiga down the dairy aisle was retired teacher Bob Grenus, 70, of Akron, who loaded five cartons of jumbo eggs into his shopping cart with the help of his 5-year-old grandson, Sam Beswetherick.
Grenus was buying enough eggs for his 12 grandchildren to color for Easter, and was stymied by the sale price of $1.69 a dozen. ''I remember when 99 cents was the sale price,'' he said. ''I just wonder if the extra money is being passed down to the chickens.''
Kent Romesberg, corporate manager for Ellet Grocery Corp., which operates IGA stores in Akron's Ellet and Firestone Park neighborhoods, said customers might be shocked if they realized how much of the recent price increases his stores have absorbed.
''You don't want to increase the price of milk by $2 a gallon in one day. . . . But if prices go up again, it will get immediately passed on to the customers. We're at the point where we can't absorb any more,'' he said.
Romesberg said his profit on milk has been cut in half. Specials like 10 half-gallons for $10, which the stores were running just a year ago, won't be coming back any time soon. ''We've definitely seen an impact in the dairy department.''
Jim Trout, vice president of sales and merchandising for Acme Fresh Markets, said the only reason Acme was selling eggs for $1.69 a dozen before Easter was because the company decided to sell them at a loss due to the holiday.
''Who would have ever thought at $1.69 a dozen, that Acme wasn't making money on eggs?'' he said. ''It's not because the retailers are making more money, but the cost of the eggs is drastically higher than last year.''
In the grocery business, the profit margins are slim, traditionally below 5 percent, depending on the size of the operation. ''The supermarket industry doesn't have anywhere to go, so it does have a direct impact on the customer,'' Trout said.
Paljich, 41, said her weekly food bill for her family of six has gone up from about $130 to $200. She does what she can to minimize her spending. She uses her grocery store savings card, clips coupons, shops at discount or warehouse stores for better deals, and buys extra when items are on sale, like meat for her deep freezer.
But Paljich said groceries are a necessity, and she will pay what she must to get them. ''I don't have a budgeted amount that we spend. It's one of those things where you get what you need.''
Price strategies
Whether other consumers share her attitude is the subject of study by food producers.
Gathered in Chicago this past week for the Reuters Food Summit, CEOs of some of the world's largest food companies talked about their plans to keep their companies' bottom lines healthy despite record commodity costs and soaring fuel costs.
Price hikes were part of their strategies.
According to reports on the summit:
• Kraft Foods Inc. told Reuters that ''consumers have to eat,'' and they are waiting to see what cash-strapped consumers will eat in these difficult economic times. ''We don't know how consumers will shake out in terms of what choices they make over time,'' Kraft North America President Rick Searer told Reuters. So far, the company has been able to increase prices with little pushback from consumers.
• ConAgra Foods CEO Gary Rodkin said his company will keep raising the prices of its foods — including Healthy Choice meals, Hebrew National hot dogs and a host of other packaged foods — to meet its earnings targets. The company has announced increases for more than 95 percent of its portfolio to help offset surging costs for wheat, vegetable oils, energy and other commodities.
• Unilever Plc/NV, the world's third largest food group, which makes Hellmann's mayonnaise, Lipton tea and Skippy peanut butter, told Reuters it offset the sharp rise in commodity costs by increasing its prices as well as making cost savings, with no immediate effect on sales.
Higher energy costs to produce and deliver foods are behind increasing commodity prices. But the alternative to crude oil and gasoline — corn-based ethanol — is creating its own havoc on the commodities market.
The majority of corn grown in the U.S. is used for animal feed. As more fields are being converted from feed corn to ethanol corn, the price of feed has escalated dramatically, causing prices of beef, milk, eggs and other corn-fed animal products to rise.
But the changing face of the global economy also is being felt in Akron shopping carts.
Wheat traditionally trades between $3 and $7 per bushel, but wheat futures have been trading as high as $18 a bushel in some markets this month.
Leibtag said higher production costs for wheat have contributed to its near tripling in price, but rising global demand also is a factor.
The U.S. always has been a big exporter of wheat. Countries like India and China have growing economies and expanding middle classes that want a better variety of foods and are willing to pay for them, he said.
With the dollar so weak, it's more profitable for American wheat to be sold to foreign countries than sold here, driving up prices for wheat and every product made from it, from flour and bread to crackers, pizza and cookies.
''The demand is outpacing the supply, and the U.S. is a source of supply for other countries,'' Leibtag said.
Bad for businesses
For Akron-area shoppers, this means a bag of flour has gone up from an average cost of $1.44 in November 2006 to $2.54 now.
''It's a tough time to be a bakery owner,'' said Rick Sands, owner of the Great Harvest Bread Co. on Fishcreek Road in Stow. But he added, it's a worse time to be a consumer: ''They are the ones who are going to pay.''
Sands has seen his flour prices double since January 2007, and they continue to rise. ''I think it's going to be a while. The commodities market is just going out of control.''
Sands is able to control some costs, because he buys wheat berry directly from a grower in Montana to grind his own whole-grain flour. He also was able to purchase this year's supply at last year's prices.
''The bottom line is, I wouldn't want to be a mom with small children trying to feed a family in this day and age,'' he said. ''There's no real end in sight.''
For restaurants, rising food costs are a double whammy. Operators must deal with the increases, while at the same time their customers have less money for things like eating out.
''Everything's climbing. What are you going to pass on? . . . How much can we pass on? It's affecting the whole economy. Discretionary income is shortened out,'' said Jeff Bruno, owner of Papa Joe's restaurant in Akron's Merriman Valley. He's paying 25 percent more for pasta, double for milk and triple for eggs, from a year ago.
Bruno said his business has been able to ride out the economic storm for now, due to a loyal customer base, his restaurant's successful carry-out deli, and his own willingness to absorb some costs. Specifically, he's taken on $500 to $1,000 a month in fuel costs that he pays wholesalers to have foods delivered to his business, just to keep menu prices stable.
For the remainder of this year and into 2009, Leibtag said the commodity markets remain uncertain. However, there are a few hopeful signs in his forecast:
• Milk and egg prices should stabilize — they won't go down, but they won't keep going up either.
• As corn prices continue to surge, meat processors are taking more animals to slaughter younger to avoid having to feed them longer. That will cause a drop in meat prices later this year. Unfortunately, it likely will mean increases for beef, pork, and poultry in 2009 and 2010 when supplies are low.
• Barring any spring freezes or natural disasters, the price of fruits and vegetables should remain constant with no sharp increases.
Lisa A. Abraham can be reached at 330-996-3737 or labraham@thebeaconjournal.com.
When Jennifer Paljich picked up a few cartons of eggs to dye for Easter on her recent trip to Giant Eagle in Green, she had sticker shock. They were two for $5 on sale.
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