Consumers eating higher food costs
— -- The average price of milk is up about 21% in the last year, and orange juice is squeezing budgets about 31% more than it was in July 2006.
When gas prices soar, people often drive less. But when the cost of grocery-store staples sets records, as they are now, few families are willing to do without.
"Food prices fluctuate a lot, so people don't factor it into budgeting decisions," says Ellen Davis, spokeswoman for the National Retail Federation, which represents many grocery stores.
A variety of factors are contributing to higher prices for bread, cereal, cheese and other shopping-cart basics, says agricultural economist Tom Jackson of the economic consulting firm Global Insight.
As the standard of living rises in countries such as China and India, more of our food goes there, which puts pressure on prices.
Meanwhile, demand for ethanol is raising the price of corn. That boosts prices for milk, chicken and beef, because corn is used for feed. The higher price of milk affects the price of cheese, and that, in turn, raises the prices of processed foods with cheese in them.
So what's a budget-minded shopper to do?
Larry James of San Mateo, Calif., who used to buy 2 gallons of milk for $3.59 and now pays $6.29, says he has few choices.
"What can I do about it? Picket the grocery store?" James asks. "About the only thing I have a little control over is how quick or slow I use up the $3-a-gallon gasoline I purchase."
That's one of the reasons high prices, such as for milk, aren't budging, says Jackson. "You're going to buy milk if you have kids," he says. "If people don't stop buying, prices are going to keep going up and up."
Still, people are looking for ways to keep their food budgets under control.
Many shoppers are turning to generic or store labels as a way to offset the extra money they're spending on staples. And stores are helping by offering more private-label foods and products.
"More people are switching to generic from brand name," says Davis. "They are trading down."
