Higher food costs trickling down to consumer


A man's gotta eat, but there's no such thing as a free lunch, what's a guy to do? According to a piece in today's Wall Street Journal, food prices have advanced by a sizable margin of late, jumping more than they have in 17 years. And its not just the price of caviar and fine cheeses. Basic staples such as eggs, milk, and bread have surged as fuel costs crimp suppliers and global demand for meat and milk grow.

Here are some specifics:

  • The average retail price of a dozen eggs went up 38% to $1.86 in November 2007 from a year earlier.
  • The average cost for a gallon of milk rose 30% to $3.90.
  • An average head of Iceburg lettuce rose 16.5% to 99 cents a pound .
  • The average loaf of whole-wheat bread hit $2.67, up 12% on a year-over-year basis.
  • Overall, food prices as indicated by the consumer price index jumped 5.3% on a seasonally adjusted annual basis through November, compared with a 2.4% increase through the entirety of 2006.
Naturally, the change in food costs is impacting restaurants as well. Sandy Levine of New York's Carnegie Deli told the Journal that "Between weather conditions, fuel charges, and labor, everything's going up." The venerable deli is subsequently hiking its prices on several menu items this year. Burger King Holdings, Inc. (NYSE: BKC) lifted prices by 1% in July; McDonald's Corporation (NYSE: MCD) nudged its menu prices by about 3.5% during the past year and will continue to do so in an effort to keep pace with rising dairy and poultry costs.

So what can the average consumer do? Get more creative with ingredients. Learn to love generic and store-brand names instead of their pricier rivals. Don't let things go to waste! Look for farmer's markets that eliminate the middle man (cutting down on shipping expenses). And dine in more than carrying out (home cooking is costing more, but is still cheaper than take out... and often better for you). What tricks for eating well while watching one's budget would you suggest?

Beth Gaston Moon is an analyst at Schaeffer's Investment Research.
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Last updated: February 13, 2012: 02:34 PM

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