Your grocery bill is getting higher, and higher

Grocery prices have been reported to be increasing and are projected to increase by 4 or 5 percent this year and another 2 or 3 percent next year. THe combination of higher grocery prices and a high jobless rate has been putting a strain on many individuals.

By Allison Linn
November 17, 2011

Paula McGowan has cut out soda, switched to store brands for other foods and even sent her boyfriend hunting for deer so she can put food on the table.

Still, she finds herself struggling with higher food prices.

“It’s milk, bread, just the basic stuff,” she said. “We’re looking at basics and it’s all going up.”

After two years in which overall food prices barely budged, groceries are getting more expensive.

The price of food at home is projected to rise by 4 to 5 percent this year, and another 2 to 3 percent next year, according to the Agriculture Department. That’s adding another financial worry for many people already living with tight budgets thanks to the weak economy and high jobless rate.

The percentage of people who say they had enough money to buy food in the last 12 months fell to its lowest level in three years, according to a Gallup poll released this month.

The vast majority of Americans surveyed — 79.4 percent — said they have been able to buy the food they need. But that doesn’t mean it’s easy.

McGowan, 44, lives with her boyfriend in Versailles, Ky. Her job in information technology has been stable, but her boyfriend has had bouts of unemployment and now runs his own lawn mowing business. That’s making it difficult to keep up with rising costs.

“I literally live paycheck to paycheck,” she said.

McGowan isn’t alone. Nearly one-third of Americans say rising food and gas prices are making it difficult to save money, according to a recent poll from Country Financial.

When she goes to the grocery store, McGowan said she brings a detailed list, coupons and a strict budget. She buys low-cost but filling food like rice and pasta in bulk and relies on cheaper protein like eggs to stretch the couple’s meals.

“For us, having bacon on a Sunday morning is a luxury,” she said.

She’s counting on deer hunting season to provide them with meat for the winter.

Ricky Volpe, a research economist with the USDA’s Economic Service, said there are many reasons food prices are rising.

Some crops have been hurt by bad weather, and a surge in fuel prices has made it more expensive to produce and transport food.

In addition, he said, the weak dollar and growing overseas demand for meat are pushing up the prices of beef, pork and dairy products.

Some foods, including beef, are in shorter supply because ranchers cut back on how much they were producing when the economy weakened and now must play catch-up. The price of beef was 10 percent higher this September than it was a year ago, according to government data.

For many food producers, it’s a combination of things.

“Companies can usually handle one or two of their commodities ticking up,” said Ryland Maltsbarger, senior economist with the agriculture service at IHS Global Insight. “But when you get labor costs on top of transportation costs on top of commodity costs on top of a few other costs … it all plays into it.”

There are ways to save money.

For example, Volpe noted that while the price of fresh fruits and vegetables has gone up considerably, prices for canned or frozen produce aren’t going up as quickly. Fresh fruits and vegetables costs 7.6 percent more in September than a year earlier, while processed produce prices were up by 4 percent over that same period.

Also, while beef prices have gone up substantially, chicken farmers have been able to respond more quickly to increased demand, so poultry prices aren’t expected to rise as fast. Poultry prices were up 3 percent in September over a year ago.

As the holidays approach, food costs add another challenge for people on a budget. The American Farm Bureau is projecting that a turkey dinner will cost 13 percent more this year than last year.

McGowan said she planned ahead for Thanksgiving last year, when she got a $10 Butterball coupon from ordering office supplies and a $25 grocery gift card from her employer.

Those funds went toward a turkey that’s already in her freezer. Now she only has to budget for side dishes and oil – to deep-fry the bird.

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