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Serious Dough
(By Alastair Miller -- Bloomberg News)
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Ethanol, a fuel that can be derived from corn products, set some of the rising grocery prices in motion. Demand for ethanol caused a worldwide shortage of corn this year, sending prices for futures of the crop on the Chicago Board of Trade above $4 a bushel last June, compared with about $2.50 two years ago. As farmers scrambled to grow more corn, crops such as wheat and soybeans were replaced, reducing their supply, according to Michael Swanson, a Wells Fargo agricultural economist.
Droughts and poor weather that hurt crops in Australia and the Midwestern United States pushed prices for the corn sharply higher as demand increased from importers in North Africa and Europe. The Agriculture Department said this week that it raised its projections for wheat exports.
That has trickled down to the shopping basket, as prices in July for cereal and bakery goods increased 4.1 percent from a year before, compared with 1.8 percent the previous year.
It's not just here. Higher pasta prices prompted consumer groups in Italy to launch a one-day boycott of pasta this week. Prices there have soared as much as 20 percent.
"Wheat is much more concentrated than corn in terms of the products it's used in, but people will keep eating even if it gets more expensive," Swanson said.
He said food prices are expected to continue increasing through the end of the year as the effects of higher wheat, corn and soybean prices work their way through the food production pipeline. But he said wheat prices will fall back to more normal levels as production catches up with demand next year. Corn prices will also normalize, he predicted, because ethanol producers can't afford to pay lofty prices for the commodity.
Butch Meharg, a 49-year-old Fairfax resident, has felt the price increases for months. He recently came to a Safeway in Fairfax to buy steaks, bread and instant coffee that he saw were on sale in a newspaper advertisement.
With beef prices up 6.4 percent in the past year, it's been harder to afford his favorite meal, T-bone steak. Now, he loads up on bread, coffee and other goods when there is a sale. He said he tries to make his streak last longer by cutting it into smaller portion sizes and freezing portions he doesn't eat right away, making sure nothing goes to waste.
While loading his blue SUV with several bags full of sale items, Meharg said: "I do anything to find the deals now -- look at coupons and take more than one trip to different stores. It's worth it."
