Consumers already faced with rising prices may be getting another
helping of food inflation, and it seems likely to come from higher
prices for chicken and pork, reports The Associated Press in The
Seattle Times.
Overall, food inflation could double this year, lifted by the
rising costs of fuel, corn and soybeans, some analysts
predict.
Food inflation hit 4 percent last year, up from 2.4 percent in
2006. While beef prices were already high, chicken and pork prices
didn't reflect record costs for feed and fuel. That's poised to
change as chicken and pig producers who have been losing money
slaughter more animals to decrease the supply and raise the prices
they can charge.
Higher food inflation would further challenge shoppers who are
already limiting themselves to sale items and store brands as they
contend with the worst food inflation since 1990.
Mary Lee Rydzewski, a retired Amtrak engine dispatcher who lives in
Cheshire, Conn., says she has already switched to store brands and
sale items because of higher food prices. If they increase more,
she plans to cut back again.
But Karen Leedahl, a pastor who lives in Latrobe, Penn., said she
always bought store brands and shopped for sale goods. Two weeks
ago, she started walking more than a mile round-trip to the grocery
store instead of driving.
If prices increase more, "I'm kind of in trouble," she said. "I was
already trying to save."
U.S. shoppers spent 5.8 percent of their income on food in 2006,
according to the U.S. Department of Agriculture -- a lower
proportion than any other nation. In the United Kingdom, consumers
spent 8.7 percent of their income on food, and in most of the world
it's at least 10 percent.
But the U.S. portion seems certain to rise, as chicken and pig
producers say prices have to go up as feed costs increase.
"American consumers are only just beginning to feel the impact of
sharply higher food prices," said Pilgrim's Pride Chief Executive
Clint Rivers. The nation's largest chicken producer posted a wider
quarterly loss Monday as it paid more for feed and took a
restructuring charge.
Pork farm losses may total $3.8 billion for 2008, one-quarter of
total production, according to Chris Hurt, an agricultural
economist at Purdue University. He calls the industry "a financial
disaster in progress."
It will be easier for publicly traded meat producers to weather a
money-losing quarter than for farmer Bill Tentinger in LeMars,
Iowa. Tentinger said he expects to spend $85 per hundredweight
feeding his hogs this year; at current levels, they will fetch
prices in the mid $40s.
"Take that figure, times 10,000 hogs, and see if you can eat
breakfast decent in the morning," said Tentinger.
The biggest driver to prices is grain costs, which have been
affected by the rise in ethanol production and strong export demand
due to the weak dollar. Corn costs have more than doubled over the
past two years from $2.50 a bushel to $6.
Jim Hertel, of Willard Bishop food-retail consultants, is
counseling his grocery-store clients on price-increase strategies.
One piece of advice -- don't make your store brands too cheap.
Shoppers who buy them are looking for a 20 percent discount, so
stores that price them 30 percent cheaper are losing money.
"We haven't seen hard-core food inflation for 30 years," he said.
That's not only a challenge for shoppers, it's a challenge for
retailers, he said. "A lot of people who knew what to do, who
learned their lessons in the late '70s or early '80s, they're
retired at this point, if they're lucky."






