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THE IMPACT OF GLOBAL CATASTROPHES

[ 0 ] Apr. 11, 2011 | SBO Editor

Local Food Prices Are Going Up Due To Supply Problems Around The World

Supply problems thousands of miles away, along with a growth in demand by middle-class consumers in China and India, are leading to double-digit increases in the wholesale price of many foods, and that is leading to higher retail prices.

“Everything is tied together,” said Brian Todd, president of The Food Institute in Upper Saddle River. Increased demand in one place means fewer supplies in others, “and that means higher prices.”

Consumers have thus far seen only a hint of what’s to come.

Last week the Bureau of Labor Statistics reported that its food-at- home index — the part of the Consumer Price Index that measures supermarket prices — rose by 0.8 percent in February, its biggest monthly gain since September 2008.

Increases were reported in nearly all food groups, including fruits and vegetables (up 2.2 percent) and meat, poultry, fish and eggs (up 1.2)

Over the past year, the CPI’s food-at-home index is up a modest 2.8 percent, with some of those increases hidden on shrinking package sizes for a variety of products, including coffee, sugar, cereal and orange juice.

But the Producer Price Index, which tracks costs in getting products to market, was up 3.9 percent last month for “finished” consumer foods (those ready for the supermarket shelf) — the biggest monthly gain since November 1974. Also, the index of crude foodstuffs and feedstuffs, a category that includes wheat, corn, soybeans, sugar, meat and poultry, rose 29 percent in the past year.

That’s why, despite efforts by business owners to eat or at least limit any increases, the upward trend at retail is likely to continue.

The latest government forecast predicts retail price increases of up to 4 percent this year, Todd said.

“I think most merchants have been absorbing the costs, cutting back where we can,” said Domenic Scalia, manager of Corrado’s market in Clifton. “No one wants to be the first one to raise prices.”

Competition has a lot to do with it, said Ed Doherty, whose Allendale-based company, Doherty Enterprises Inc., owns 93 restaurants in New Jersey and New York, including 60 Applebee’s and 26 Panera Bread cafés.

“Restaurants, in addition to competing against restaurants, also compete against supermarkets,” he said. “We’re competing for the same share of stomach.”

“Supermarkets tend to raise prices quicker, and that puts us in a little advantage as long as I can hold off,” he said.

To maintain that edge, “you try to reduce costs in other areas, tighten the hours, cut off utilities earlier, try to do every little thing to save,” he said.

Supermarkets take the same approach, said Karen Meleta, a ShopRite vice president.

Manufacturers are beginning to pass on some of their price increases, and more are coming, “but we’re doing everything we can to hold our prices,” she said.

In the last two months, Kellogg Co., the world’s biggest cereal company, said it would raise prices 3 percent to 4 percent because of higher grain costs. Sara Lee Corp., maker of several processed meat brands, as well as baked goods, said it will “continue to increase prices” this year to offset higher supply costs.

In February J.M. Smucker Co. said it would raise prices on Folgers and Dunkin’ Donuts coffee for the third time this year. Increases have averaged about 10 percent each. On Friday, Starbucks announced it was raising the prices of its packaged coffee by up to 12 percent.

Some recent price increases, especially on fruits and vegetables, are due to seasonal weather-related produce shortages, so the impact is likely to be short-lived as new crops from other regions replace tomatoes, lettuce or bean crops wiped out by rain or frost in Mexico or Florida.


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Category: Features