Food prices hurting customers and stores alike

McALLEN - An extra few cents for a can of corn or another $1 for a box of cereal is simply a fact of life to Myra Atkins as she pushes her cart through H.E.B. Plus! in Mission.

"Everything has gone up a little, maybe 25 or 50 cents," the Mission resident said. "It really hasn't changed what I buy. The money just has to come from somewhere else."

Like thousands of Rio Grande Valley residents, Atkins has noticed grocery prices quickly climbing in recent months. Yet, like most others, she has little power to change her spending habits.

Grocery inflation, paired with gas prices, is climbing at an astronomical rate, pinching dollars out of residents in one of the nation's poorest regions.

Some foods, like eggs, have nearly doubled in price in the past five years, outpacing overall inflation or increases in income. It's the worst case of inflation since the 1970s.

Food prices have risen at a rate of about 4.5 percent a year during the previous 18 months, said Ephraim Leibtag, a food economist with the U.S. Department of Agriculture. The normal food inflation during the previous decade was 2.5 percent.

"People are forced to spend more on the basics, which would force them to cut back elsewhere," Leibtag said. "The money has to come from somewhere."

For instance, a pound of chicken is up 11 percent from a year ago to $1.16 a pound.

Bananas are up 6.5 percent; nearly every other food tracked by the USDA is up from February 2007.

A new report said feeding a family of four on a moderate budget now costs about $916 a month, almost $60 more than a year ago, according to a nationwide USDA study.

The increase is because of a myriad of economic factors, including growing global demand for food, record fuel prices and a weak U.S. dollar.

Higher fuel prices, along with more attention on the environment, is placing demand to produce more corn-based ethanol, which is driving up corn prices. More expensive fuel prices also create extra shipping costs for food producers and distributors.

Also, growing demand for food and energy by China, India and elsewhere is simultaneously driving food commodity prices even higher, Leibtag said

In recent months, the H.E.B. grocery chain has noticed more customers seeking cheaper store brand products, said Carlos Contreras, a spokesman for the company. That's a sign customers are aware of rising prices, he said.

"It means people are finding ways to cut back," he said.

The problem may not alleviate any time soon.

A USDA report released this week showed farmers are growing about 9 percent less corn this year than in 2007, meaning corn prices, and all corn-related products like tortilla and beef, will rise in price again this year. The price of corn, which has doubled since 2002, is especially important because it is an ingredient in so many foods. And many ranchers use corn as the primary food for their livestock.

At the Chicago Board of Trade, a bushel of corn has more than doubled since 2002, to $4.78 this year.

Corn prices have also affected beef because most ranchers use corn as their primary feedstock source.

Retailers, in particular, say they've been hurt by rising prices in the form of fuel surcharges and dwindling business from customers.

Marco Vera, a manager at Vera's King O' Meats in Edinburg, said prices have dramatically increased in the past two years, spurring him to raise prices and cut his operating costs.

The price of chicken leg quarters at Vera's has doubled, for example - from $11 a box to $22 in recent months.

Fuel surcharges have been added onto many of Vera's incoming shipments, he said.

He's also noticed a decrease in customers, with tougher competition from grocery stores and customers cutting back on discretionary spending.

"I had to cut back on employees and cut down on prices," he said.

Food producers, such as the El Arbolito tortilla factory in Weslaco, have also observed a marked increase in costs for supplies like flour and corn meal dough, said Artemio Flores, owner of the McAllen tortilleria.

Corn meal prices have sharply increased along with rising corn commodities costs, and likewise for flour.

"We don't want to raise our prices, but we have to," Ardila said.