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The Tampa Tribune: Rising food costs take bite out of budgets

Tuesday, September 24, 2013

By Richard Mullins

Anyone wanting to save money on groceries might want to skip breakfast, especially the bacon.

Bacon, eggs, coffee and butter have skyrocketed in price over the past four years — thanks to high grain and energy prices and soaring demand for food abroad. If there’s any good news for shoppers, it’s that prices may have reached a more stable plateau.

That’s one revealing piece of data from a project that The Tampa Tribune has conducted over the past four years. Every week, Tribune staffers track the price of 30 “Market Basket” items at five different grocery stores: Publix, Wal-Mart, Winn-Dixie, Sweetbay and Target. Unfortunately, over the past four years, 22 of those 30 items rose in price, with bacon zooming up 66 percent. Just eight items fell in price — and the average total of the 30 Market Basket items is up just over 15 percent, well above the inflation rate.

The project comes to a close this week, a casualty of shifting newsroom priorities, but it ends on a high note.

“There is some good news with food prices going forward,” said Rick Volpe, an economist with the United States Department of Agriculture. “We’re expecting prices may only rise 2.5 to 3.5 percent in 2014. … Across the board, things look very stable.”

Over those four years, the same dynamic has played out among the five grocery stores. Wal-Mart leads with the lowest prices, sometimes $20 or more below the total for the same items purchased from other stores. Winn-Dixie is the most stable, yet also the most expensive. Target and Sweetbay bounce around between the two poles.

For those who watch their food budgets closely, it’s worth knowing this: Overall prices at all those stores are up significantly, but none more than Publix, whose Market Basket total is up 20 percent over four years.

This carries a caveat, though: The Market Basket doesn’t count an item as half off when items such as Wheat Thins or pasta sauce go on a buy-one-get-one-free sale. This is a statistical question that food economists have struggled with for years.

On one hand, BOGO is technically a half-off sale. On the other hand, shoppers still need to pay the full price to buy just one item. This has become an even sharper distinction as Publix over the past few years has put more emphasis on BOGO deals, and added more products to their BOGO sales. Other stores have dabbled in BOGO sales, too, including Sweetbay and Winn-Dixie.

Winn-Dixie uses another marketing tool that can complicate apples to apples price comparisons: It’s the only one of the five local stores that offers a shoppers card, good for discounts on many of the 30 Market Basket items. A big question in the industry is whether such a membership card program will come to Sweetbay as the parent of Winn-Dixie, Bi-Lo Holdings of South Carolina, takes over the bulk of Sweetbay stores in Florida.

As for the food itself, fresh food items generally cost much more lately, while their processed food counterparts remained more stable or fell in price. Bacon rose 66 percent during the past four years. Eggs rose 37 percent. Strawberries rose 25 percent. Iceberg Lettuce rose 20 percent. By contrast, dry spaghetti fell 4 percent. Canned tuna fell 18 percent. Bologna fell 37 percent.

The combination of higher fuel and higher grain prices are creating a multiplier effect on some items. The price of corn is up dramatically with the growing demand for food but also because it’s used in ethanol fuel production. As the price of corn rises, so does the cost of feed corn for dairy cows, which leads to higher milk prices.

And as energy prices rise, the cost to process milk into other products has an extra impact, with cheddar cheese up 13 percent over the four years and butter up 52 percent. Beef prices rose, partly due to corn, as well, with lean ground beef up 19 percent.

Other items seemed impervious to price pressure. Bananas, for instance, have remained about the same price at several stores over several years — between 59 cents and 69 cents per pound — and fresh orange juice is up just 5 percent over four years. That’s partly because imported fruits take relatively little processing, and when they come by large freighter shipments from South America, there’s less of an impact from high fuel prices.

For the statistically minded, the total Market Basket growth from $69.79 in 2009 to $80.27 now is well above the inflation rate, according to the Bureau of Labor Statistics that compiles the Consumer Price Index.

Another bit of good news: Fruits and vegetables are actually falling in price over the last 20 years when inflation is taken into account.

“The United States opened to a vast global marketplace for imports,” Volpe said. “That means you have access to almost whatever you want all year round. That’s increased the supply substantially.”

Going forward, Volpe expects food prices will probably stay closer to the bottom end of the 2.5 to 3.5 percent range of projected price increases through 2014.

“We’re intentionally giving ourselves some wiggle room in there for a severe weather event. If a big storm hits in the right place at the right time, it can have a real impact.”

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