Food prices surge higher as economy declines

Jackie Mantey

Families, businesses feeling effects of highest food inflation in 17 years

With all the focus on gas prices and the housing bust, the steady rise in food prices has been starved of attention in discussions regarding the economy.

But the U.S. Department of Labor reported last Wednesday in its monthly Consumer Price Index Summary that U.S. families’ spending on food and beverages last month was 4.4 percent higher than March of last year, making food the latest concern in the declining economy.

The bottom line is that the United States is battling the largest rate of food inflation in 17 years, according to Lakshman Achuthan, managing director of the Economic Cycle Research Institute.

According to the Department of Agriculture, consumers in the States are paying 25 percent more for eggs, 13 percent more for milk and 7 percent more for chicken than they did a year ago.

In spite of these national averages, Giant Eagle Inc., which has two locations in or near Kent, docked its prices on 1,400 products on April 17. A majority of these price cuts were on food items.

“This decision was made primarily to help our customers during hard economic times,” said Nicole Miller, a spokesperson for Giant Eagle.

Large stores such as Giant Eagle have been able to cut prices despite the increases because of the large quantities they purchase from retailers and producers, Miller said.

Local businesses, however, haven’t had that luxury.

Judy Lanfranchi has owned and operated Judy’s Sweet Sensations, a cake delivery store in Kent, for more than 20 years. Lanfranchi said in those two decades, this past year was the worst when it came to increased prices of supplies for her products. She, in turn, had to up her prices in February. This, coupled with other factors — all associated with the cycle spawned from the quick downturn of the economy — has hurt her business.

“I think people are really pulling in the purse strings and trying to figure out a better way to stretch the declining dollar,” she says. “Small businesses definitely are hurt more as we can’t buy in large quantities to offset the increased costs such as larger companies can do. We typically have a smaller customer base of course, so when money gets tight, our profit margins shrink for lack of business.”

The reasons behind the rising food costs nationwide are numerous, but Achuthan said they’re creating a hybrid of a monster now because they’re all converging at once.

Those reasons, according to Achuthan, include the following: globalization, which is the inclusion of developing nations into the world economy as sources of production, has grown, creating large workforces in countries that now have more money to buy food; a weaker dollar is driving prices upward as the United States increases imports; higher gas prices rise food production costs; and ethanol fuel programs create a demand for corn which makes corn prices higher, which leads some to up prices for other products such as meat and dairy.

As prices go up, so do concerns.

“I am very worried about the immediate future as there seems to be no end in sight for lower gas prices, and that factor alone is literally driving us out of business from all angles,” Lanfranchi said, adding that because Judy’s delivers, gas has upped the delivery charges for customers. “Every product on the market is costing more to transport to suppliers so the cost basis just keeps going up. I wish I were more optimistic, but it is a bit bleak right now for many companies — small and large.”

Bleak is also a word that could describe how individual families are feeling. An increase of nearly 2,000 cases of Portage County families using food stamps was reported in just six years, according to a recent report from the Ohio Department of Job and Family Services. Statewide reports garner the highest number of citizens needing food stamps in Ohio’s history. The Portage County Department of Job and Family Services expects that number to continue.

An influx in food stamps isn’t the only consequence of inflation, Achuthan said. Companies will start to see families putting off spending on discretionary items such as cars and home appliances or skipping the Starbucks latte for a regular cup of coffee in order to keep food on the table; however, there’s a silver lining to that cloud.

“This downward pressure on consumer spending is part of the U.S. recession story,” he said. “This will bring down the cost of discretionary items, like cars, TVs, and even Starbucks coffee.”

But hold on for the bumpy ride that doesn’t yet have an end in sight, he adds. “The credit crunch will eventually pass. But while it remains, it will help keep prices.”

Contact public affairs reporter Jackie Mantey at [email protected].