Higher food prices will hit consumers hard

Hope you're willing to pay a little -- and in some cases a lot -- more.

Just as the holiday season hits, prices are rising -- especially on those items you'll need to cook for all those gatherings and the staples you always keep stocked in the kitchen.

Think meats, milk, eggs, cheese and sugar.

"We see the price increases, and we have to pass them on to customers," said Chris Archer, owner of Archer's Meat Packing in Greenwood. "There's an increase in prices on beef and hogs and especially goats and lamb."

But it's not just meats. Overall, food prices are climbing, and economists expect them to rise even faster next year.

The increase is nothing astronomical when you look at food prices as a whole. The U.S. Department of Agriculture is predicting that food prices this year will rise 0.5 percent to 1.5 percent, the lowest annual rate of inflation since 1992. Next year, the forecast is for an increase of 2 percent to 3 percent.

"That's a reasonable amount of increase, especially considering prices last year were a bargain," said Jerry Conover, director of the Indiana Business Research Center at Indiana University's Kelley School of Business.

But it's not as reasonable when you look at some individual items or categories, such as meats and dairy, where the jump is significant. Pork, for example, is up 13 percent from a year ago; butter is up 25 percent; and milk has risen 6 percent, according to the USDA.

To consumers, many of whom are still struggling financially, the increase can seem unbearable.

"I've already decided I'm not cooking it all this Christmas. The kids are gonna have to pitch in," said Elaine Scruggs, who was shopping in the baking aisle at Walmart on Pendleton Pike on Monday. "I'm not lazy. I'm just cheap."

Scruggs gasped when she saw a 5-pound bag of Domino Sugar was $4.24. Sugar prices have risen more than 3 percent in the past year.

She quickly snatched up the Walmart Great Value brand for $2.48.

"At least I have an option," she said. "It's getting bad."

Prices may seem worse right now, however, because food prices were so abnormally low last year, experts say.

"The market crash in September 2008 knocked prices down because of the uncertainty," said Mike J. Hicks, director of the Center of Business and Economic Research at Ball State University.

The price increase also may feel unreasonable because it hasn't happened evenly. Some foods have suddenly become more expensive, while others have stayed the same or gotten cheaper.

At Kroger, the ups and downs vary depending on what section of the store you're shopping in, said spokesman John Elliott.

"We have seen incremental price increases, although we are still seeing some price inflation and some price deflation varying by departments," he said.

Several factors are at work, economists say, when it comes to today's food prices.

First, as the world's economy has started to recover in recent months, the demand for grains such as corn, wheat and soybeans has risen. Farmers are now exporting more grain internationally, while at the same time, demand in the United States has climbed, too.

Second, because there's more demand for grain, farmers who raise livestock -- both for meat and dairy -- are being forced to pay more to feed their herds.

Third, fuel prices are up, making it more expensive to deliver products.

And fourth, those higher costs are showing up in wholesale prices for food and, in some cases, retail prices that consumers see at grocery stores and restaurants. General Mills, Sara Lee, Starbucks, J.M. Smucker and Kraft Foods have all raised prices this year.

In response to the situation, farmers have started planting more acres of corn, soybeans and other grain to meet the growing demand, Conover said. However, that additional supply will take a while to ripple through the industry, and new research from Purdue University predicts that a spike in the cost of fertilizer and pesticides will mean higher production costs for those farmers.

Meanwhile, livestock farmers are responding to the increasing cost of feed by reducing the size of their herds. And that, Conover said, has led to tighter meat supplies.

"It's a constant balancing act," he said of the farming industry.

On top of all that, U.S. corn yields are lower than late-season estimates, creating additional supply shortages, according to Purdue agricultural economist Corinne Alexander. And there's a wheat shortage because of a drought in Russia.

Hence, the USDA is predicting food inflation will accelerate during the final month of 2010 and the first half of 2011.

None of that is welcome news for consumers.

Sheila Tardy, who was shopping at the Kroger on East 16th Street last week, said she'll keep doing all she can to save money at the grocery store.

"I'm just real picky about where I shop," she said.