Food prices taking bite out of budgets: Costs likely to climb up to 4% this year, economist says

'I try to be frugal,' says Fiona Vaughan, a College of Charleston student, as she looks for items on her shopping list at a downtown grocery store Monday. 'I know they go up but there's not really anything I can do about it, ‘cause I still have to eat.'

Mary Seabrook joked that she won't have to go to Weight Watchers if food prices keep climbing.

"They are awful," the Ladson resident said while shopping in a downtown Charleston grocery store. "I just shop for the stuff that's on sale. I just won't eat as much."

Overall food prices will climb 3 percent to 4 percent this year as world demand in an economic recovery drives up the cost of fuel as well as basic commodities such as corn, wheat, soybeans and sugar, agricultural economist Chris Hurt of Purdue University said Monday during the Food Media Seminar at Charleston Place Hotel.

And if a troubling drought persists into the summer across part of the world's bread basket in the south central United States, commodity prices could rise even higher and the world's food supply could be threatened, he added.

"We are shaping up for a short production year," Hurt said. "This is causing a lot of concern."

The cost of food has not reached 2008 levels before financial markets collapsed and sent prices spiraling down, but the pinch on pocketbooks is on the rise as world economic growth slowly improves from the depths of the global recession.

Food prices rose 5.5 percent in 2008, edged up another 1.8 percent in 2009, and increased a scant 0.8 percent last year, according to the U.S. Department of Agriculture.

Food costs are going back up now as a number of factors have conspired to send the price of grains and fuel higher, and the consumer will feel it for just about every item they buy at the supermarket, especially meats and dairy products because those industries rely on grain to feed animals, Hurt said.

The higher costs are driven in part by China's expanding economy and demand for corn and soybeans grown in the U.S. Other factors include increased bio-fuel production from farm products and a decline in the value of the dollar because of America's debt that makes U.S. exports cheaper and in greater demand.

"We are the biggest country feeding the rest of the world," Hurt said. "There is no surplus of basic commodities. The world is eating more than it is producing."

He said the U.S. has an 18-day supply of corn and a 15-day supply of soybeans. Stocks of wheat and soybean oil are better off, but an extended drought in parts of the U.S. could threaten harvests, Hurt added.

Much of Texas is in an extreme drought as are pockets of Arizona, New Mexico, Oklahoma, Arkansas, Louisiana, Florida, Alabama and Georgia, according to the most recent U.S. Drought Monitor. Abnormally dry conditions persist as far north as Nebraska and along a stretch of the mid-Atlantic states, including South Carolina.

Overall energy prices were up 11 percent in February from a year ago, including a 20 percent increase in gasoline, according to the Consumer Price Index. Gasoline prices have spiked higher since then because of unrest in the Middle East and North Africa.

A gallon of regular gasoline on Monday was up 83 cents from this time last year, averaging $3.66 nationally. In South Carolina, the price for the same gas averaged $3.49 a gallon, up from $2.66 a year ago.

Those higher fuel prices factor into transportation costs for goods headed to market, Hurt said.

"General inflation is going up," he said. "That's not a good thing economically when we have slow growth in income. I'm just praying we have great weather this year. We are too close to the edge with the basic food supplies."

Rising cost of food

Food-price increase forecast for 2011. All prices are up 3 to 4 percent.

DAIRY PRODUCTS

Up 4.5% to 5.5%

Sample: 1 gallon of milk

Now: $5.49

Up to: $5.79

MEATS, POULTRY, FISH

Up 4% to 5%

Sample: 1 pound ground chuck

Now: $3.69

Up to: $3.87

CEREALS, BAKED GOODS

Up 3.5% to 4.5%

Sample: 14-ounce box of cereal

Now: $4.19

Up to: $4.38

EGGS

Up 4.5% to 5.5%

Sample: Dozen eggs

Now: $2.79

Up to: $2.94

FATS AND OILS

Up 5% to 6%

Half pound of butter

Now: $3.49

Up to: $3.70

FRUITS, VEGETABLES

Up 3% to 4%

1 pound of apples

Now: $1.99

Up to: $2.07

SUGARS AND SWEETS

Up 2.5% to 3.5%

4-pound bag of sugar

Now: $3.39

Up to: $3.51

NONALCOHOLIC DRINKS

Up 2% to 3%

2-liter bottle of cola

Now: $1.79

Up to: $1.84

Sample of items from downtown Charleston grocery store