Food prices may follow gas price rise

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If you think groceries are expensive now, just wait.

The cost of food has risen in recent months, thanks to a stew of factors that includes icy weather, spiking fuel costs and strong demand for crops like cotton.

But most observers believe recent increases are just the beginning of a trend. The U.S. Department of Agriculture expects food costs to rise by as much as 4 percent this year -- an estimate some analysts see as unrealistically conservative.

The increases are another blow for shoppers whose wages have stagnated or dropped during the economic downturn. And they're difficult for restaurant owners who see no choice but to swallow rising costs.

Grocery prices rose by 0.8 percent in January, the steepest increase in more than two years, according to federal statistics. The spike was led by higher costs for fresh vegetables, up by 2.1 percent.

The increases were especially noticeable because grocery prices have been unusually flat over the last two years. Indeed, American supermarket shoppers could to some degree consider themselves fortunate.

Domestic food inflation pales compared to the spikes seen globally.

And many food producers and groceries have hesitated to respond to higher costs by raising prices, fearing their customers would shift to lower-cost products or stores.

But that may be changing.

There's only so much that producers and stores are willing to absorb.

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David Brown, director of retail sales at Arkansas-based Allen Inc., one of the world's largest producers of canned fruits and vegetables, said in an interview that he expects his company to raise retail prices by as much as 10 percent this year.

Freezing weather this winter damaged produce across the south, making fruits and vegetables more expensive. Brown said skyrocketing prices for cotton and other commodities are leading farmers to shy from growing fruits and vegetables, further escalating costs.

"There's not an endless amount of farmland out there," Brown said. "Farmers have a choice, and they're going to grow whatever is most profitable to them."

The USDA expects prices for some items to rise more sharply than others. The agency predicts the price of pork, for example, to rise by 5.5 percent to 6.5 percent, while it expects a 4.5 percent to 5.5 percent increase for dairy products.

Filled your gas tank up lately? Then you know that fuel prices are rocketing, which almost always brings higher food prices. That's because growing food and getting it to market are fuel-intensive tasks.

The one-two punch of higher gas and food costs is especially tough on the poor.

Benji Fox, who heads a regional network of food charities, says that demand at pantries rises when gas prices spike -- and subsides when they fall.

"It's not people who aren't working," said Fox, executive director of The Food Pantries. "Many of the people who come to pantries (when gas and food prices rise) are the working poor."

Avoiding higher food prices is no easy task, especially for shoppers who have already cut food spending during the course of the downturn. Consumer advocates say shoppers looking to cut costs should renew efforts to comparison shop, buy in bulk, clip coupons or eliminate higher-priced favorites.

"People are making difficult choices," said Gerri Willis, a Fox Business News anchor and author of personal finance books. "This is a case where you've got to be smart about what you're buying and how you're buying."


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