honoluluadvertiser.com

Sponsored by:

Comment, blog & share photos

Log in | Become a member
The Honolulu Advertiser
Posted on: Saturday, November 19, 2005

Food prices rose by only 0.3%

By Dave Carpenter
Associated Press

U.S. supermarket shoppers like these in Chicago have found that prices hadn't shot up as feared since hurricanes wreaked havoc with transportation costs. But experts say food prices are more likely to edge upward increasingly if oil prices don't keep dropping.

NAM Y. HUH | Associated Press

spacer spacer
spacer spacer

CHICAGO — Shopping to prepare a big feast at Thanksgiving is never cheap. But consumers who were braced for steeper costs because of the recent spike in energy prices can relax a little when they head to the supermarket before the holiday.

Thanks to stiff retail competition that keeps stores from risking big markups, prices for most food items are only nominally higher than a year ago, according to government data and survey results released this past week.

Even shoppers with full carts weren't grumbling in a spot check at a Chicago supermarket, finding that prices hadn't shot up as was feared in the aftermath of fall hurricanes that wreaked havoc with transportation costs.

"I'd say things are up a little bit but not much," said Paul Stancy, who was loading up on food and beverages Thursday at the store on the city's northwest side.

That sentiment jibed with monthly statistics reported Wednesday by the U.S. Labor Department showing that food costs edged up 0.3 percent in October — a slight acceleration.

"I think we're seeing higher food prices than we would have absent the increases in energy costs," said Ephraim Leibtag, food price analyst for the U.S. Department of Agriculture. "But we haven't seen anything go off the charts price-wise."

Food price inflation has been relatively low in 2005, he said, with costs estimated to increase 3 percent over last year.

That's how much more a traditional Thanksgiving dinner is likely to cost a shopper this year compared with 2004, according to the American Farm Bureau Federation. Based on informal price checks conducted in 30 states, the average cost of this year's feast for 10 is $36.78, up $1.10 from 2004.

In fact, sweet potatoes and fresh cranberries were among items that were lower, thanks to abundant crops this year.

The slight overall increase can largely be attributed to higher energy prices that affect processing, packaging, refrigeration and shipping costs, said Terry Francl, a senior economist at the federation.

Kraft Foods Inc., the biggest U.S. food manufacturer, gave a similar explanation this month in raising prices for its crackers, pizza, lunch meats and some other items an average 3.9 percent. The entire packaged-food industry, in fact, has been hammered by oil prices affecting plastic packaging expenses and the cost ofrunning plants and transporting goods.

Why aren't shoppers facing sharply higher prices overall?

It's for the same reason the biggest U.S. airlines continue to offer bargain fares while losing money: Customers will vote with their feet if they don't. General Mills Inc. and Campbell Soup. Co. both lost sales by putting through price increases that their competitors didn't follow.

Supermarkets, then, are understandably leery about increasing their price markups.

Another factor is that wholesale beef and dairy prices have dropped from last year's record highs, giving retailers an extra cushion to absorb some of the greater costs, said Corinne Alexander, an agricultural economist at Purdue University.

But experts say food prices are more likely to creep upward increasingly if oil prices don't keep dropping.