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Rising fuel and grain costs weigh on grocery bills
Fresno Bee


March 25, 2008

Beleaguered consumers can count on rising grocery bills for the foreseeable future, as fuel and grain prices continue to spiral, experts say.

Food prices rose 4.5 percent during the 12 months ending Feb. 29, according to the federal government's Consumer Price Index. That's about double the typical annual increase, said Ephraim Leibtag, an economist with the U.S. Department of Agriculture's Economic Research Service.

Milk and eggs especially have risen sharply over the past 12 months: 26 percent and 24 percent, respectively.

Over the past five years in urban areas, a dozen eggs increased about a dollar while a gallon of milk rose $1.18, the Bureau of Labor Statistics found.

Rising fuel costs affect every food delivered by truck. Other factors are specific to certain industries, such as bad weather in Florida that weakened supplies of tomatoes and caused a price spike in January. The fast-growing ethanol industry, which turns corn into fuel, affects a range of foods.

Whatever the reason, Sara and Ruben Estrada of Fresno, Calif., balk at what they now have to pay to feed their four children, ages 8 months to 10 years. "It's all going up, so what can you do?" Ruben Estrada asks.

The Estradas shop mostly at discounter Costco. They grumble at paying $4.50 for a gallon of organic milk, which lasts them just two or three days.

Leibtag said the doubling of fuel costs is the latest culprit. Higher fuel bills for producers and retailers increasingly get passed along to the consumer.

Milk and dairy: Leslie Butler, an agricultural economist at the University of California-Davis, reported there's "a worldwide shortage of milk and dairy products at the moment."

Drought has hampered production in New Zealand. Demand has outstripped domestic supply in China and India, which have their own dairy industries. That means the world is looking to the United States for powdered milk, butter and cheese. A weak dollar makes American milk products even more attractive, Butler said.

Wheat products: Pasta, bread and any other products with wheat as a main ingredient are getting more costly.

Worldwide consumption is rising while production is declining, thanks to drought in Australia, weather problems in the United States and other issues, said Jerry Norton, a grains analyst with the U.S. Department of Agriculture's World Agricultural Outlook Board. The result is a 30-year low in global supply.

Meat and eggs: Animal feed has experienced huge price increases lately, said Butler. Corn and soybeans, two of the few good sources of protein available for animal feed, are being diverted to make biofuels such as ethanol.

Meat prices have leveled off, Leibtag said, as producers send animals to slaughter earlier rather than pay to feed them longer. That respite will be short-lived.

The price of eggs rose by 82 percent over the past five years, the steepest increase among most foods.

Randy Pesciotta, vice president at New Jersey-based Urner Barry publications, which report commodity prices, said American egg producers need to add 3 million chickens a year to keep pace with a growing human population. But lately, flocks are shrinking.

Egg-laying chickens are getting so expensive to feed that farmers are scaling back, he said. Egg producers face added pressures while building new chicken houses, including new environmental regulations and influence by animal-rights groups, he said.

Produce: Fruit and vegetable prices are particularly volatile, said Julia Stewart, a spokeswoman for the Newark, Del.-based Produce Marketing Association. The trade group represents everyone from produce growers to retailers. "Produce is simply a risky business," she said. "We are at the (mercy) of Mother Nature."

For example, bad weather in Florida led to a price spike this winter, said Ed Beckman, president of the California Tomato Farmers.

As for Red Delicious apples, the higher prices stem mostly from dropping supplies as customers favor other varieties and producers turn to new ones, said Todd Fryhover of the Washington Apple Commission.

Fewer suppliers means less competition, and the rising cost of labor and fuel also play a role, he said.



E-mail Bethany Clough at bclough(at)
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