Prices for Key Foods are Rising Sharply; Half of Eligible Poor Don't Get Food Stamps

By Kevin Hall and Rob Hotakainen, McClatchy Newspapers. Posted August 14, 2007.

Prices for Key Foods are Rising Sharply
By Kevin G. Hall

The Labor Department's most recent inflation data showed that U.S. food prices rose by 4.1 percent for the 12 months ending in June, but a deeper look at the numbers reveals that the price of milk, eggs and other essentials in the American diet are actually rising by double digits.

Already stung by a two-year rise in gasoline prices, American consumers now face sharply higher prices for foods they can't do without. This little-known fact may go a long way to explaining why, despite healthy job statistics, Americans remain glum about the economy.

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Meeting with economic writers last week, President Bush dismissed several polls that show Americans are down on the economy. He expressed surprise that inflation is one of the stated concerns.

"They cite inflation?" Bush asked, adding that, "I happen to believe the war has clouded a lot of people's sense of optimism."

But the inflation numbers reveal the extent to which lower- and middle-income Americans are being pinched.

The Bureau of Labor Statistics said in its June inflation report that egg prices are 19.5 percent higher than they were in June 2006. Over the same period, according to the department's consumer price index, whole milk was up 13.3 percent; fresh chicken 10 percent; navel oranges 19.8 percent; apples 11.7 percent. Dried beans were up 11.5 percent, and white bread just missed double-digit growth, rising by 9.6 percent.

These numbers get lost in the broader inflation rate for all goods and services, which measured 2.7 for the same 12-month period. Across the economy, rising food prices were offset by falling prices for things bought at the mall: computers, cameras, clothing and shoes.

"All of that stuff is going down in price, but prices for gasoline have gotten higher, and food prices have gone up," said Mark Vitner, a senior economist for Wachovia, a large national bank based in Charlotte, N.C.

People also go to the mall a lot less than they go to the grocery store, so they're constantly reminded that dietary staples are up sharply.

Why are food prices rising?

It's partly because of corn prices, driven up by congressional mandates for ethanol production, which have reduced the amount of corn available for animal feed. It's also because of tougher immigration enforcement and a late spring freeze, which have made farm laborers scarcer and damaged fruit and vegetable crops, respectively. And it's because of higher diesel fuel costs to run tractors and attractive foreign markets that take U.S. production.

The Labor Department's last detailed survey of consumer spending, in 2005, showed that Americans spent about 12.8 percent of their income on food. A bit more than 7 percent of their income was spent on food at home, and 5.7 percent was spent on food away from home.

These percentages suggest that higher food prices, while unwelcome, won't break the bank for most consumers. But for retirees such as Jacqueline Wilson, 60, of Upper Marlboro, Md., rising food and fuel prices take a big bite out of fixed income. "I make every dollar count," said Wilson, outside a Giant supermarket. "I cut back. … I get only as much as I need. I don't buy it because it is 10 for $10, but so that I'm using it and not wasting my money."

Asked about her view of the economy, she answered, "Terrible."

In broad terms, the economy isn't terrible. Unemployment is near record lows, and the second quarter posted a strong 3.4 percent growth rate. But it is for those Americans who are pinched by rising food and gasoline costs, and that's a lot of folks. Half the nation's families earn below the median family income of about $56,000. Three-fifths of American families report income under $70,000.

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