A basket of groceries, gasoline and blue jeans is costing consumers 7.5 percent more than it did six months ago, according to a Deseret News analysis.
The price of the News' basket of 15 items, tracked since April, rose 1.1 percent in the past month — a much steadier increase than the 9 percent jump recorded between August and September, and a rise of 7.5 percent since April.
The U.S. Department of Agriculture projects an overall 5 percent to 6 percent increase in the price of food for 2008, the highest annual increase in 18 years. And the economic and commodity analysis firm Advanced Economic Solutions estimates food prices will rise an average 9 percent a year through 2012.
"The food manufacturers are high-volume, low-margin companies that have initially absorbed a lot of the costs of higher commodities prices," said Scott Faber, vice president of federal affairs for the Grocery Manufacturers Association, a trade group that includes Kellogg Co., Kraft Foods Inc. and Kroger Co. "But ultimately, higher commodities prices will be reflected in higher retail prices in the grocery aisle."
Smith's Food & Drug Stores, which stocks its shelves with Kroger products, notes the private label's goods are manufactured by several companies, and Smith's therefore wouldn't speculate on future food inflation. The company did say it would continue to provide good prices and seek to keep overhead costs as low as possible.
"We can't really speculate on specifics at this point in time because new opportunities may present themselves for cost savings that we haven't thought of yet," vice president of public affairs Marsha L. Gilford said in an e-mail to the Deseret News. "We continue to also look for other ways to deliver savings, like through $4 generic prescriptions and fuel savings."
The Deseret News since April has been tracking prices of milk, bread, frozen corn, laundry soap, hamburger meat, diapers, eggs, orange juice, Cheerios, Oreos, bananas, movie tickets, gasoline, takeout pizza and blue jeans to gauge how they change over time.
For stability, the best buys have been orange juice, takeout pizza and a movie ticket — and gas to get there will cost 7 percent less than it did a month ago.
Egg prices have been the most volatile, and at this point, they are down 14.5 percent in the past month.
Laundry soap's price this month rose for the first time in six months. It costs $2 more, an increase of 13 percent. Also up more than 7 percent were milk and frozen corn. Blue jeans' price tag went up 13.6 percent.
Commodities and energy prices are driving food-price increases. Commodity costs are up due to stronger global demand, a weakened dollar, some weather-damaged crops around the world, and increased use of food, notably corn, to make ethanol to fuel cars, the USDA reports.
For example, U.S. ethanol production has gone from 2 billion gallons in 2000 to nearly 10 billion gallons this year, Faber said. "That means this year alone will divert about a third of our corn crop from our food and (animal) feed supplies to fuel supplies."
Congress, looking at record-high gas prices, was attempting to reduce America's dependence on foreign oil last year when it called for the nation's annual ethanol production to hit 36 billion gallons by 2022. But the policy has helped squeeze the global food supply and keep the cost of corn — an ingredient in everything from soda pop to dog food to vanilla extract — high.
Corn prices also are partly to blame for the rising cost of meat and poultry. About half the corn crop feeds animals raised for human consumption, Faber said. As corn prices rise, so do feed prices. Feed accounts for 60 percent of the cost of producing a chicken, and 80 percent of the cost for cattle, he said.
"That cost in production has increased about 200 percent for feed and livestock operators," Faber said. "Unfortunately, this problem is going to get worse, not better."
The American Farm Bureau Federation reported Thursday that consumers forked out 11 percent more for weekly purchases in the third quarter compared with the same time last year. Retail prices for a 5-pound bag of flour were up 37 percent from a year ago, potatoes were up 32 percent, and cheddar cheese and apples increased 21 percent. Corn futures surged by 70 percent.
Meanwhile, the share of the food dollar going to farmers and ranchers fell to 19 percent, down from 32 percent in 1980 and to the lowest level in the survey's 20-year history, according to the report.
Contributing: Bloomberg News.
E-mail: jtcook@desnews.com