THE JOURNAL & TOPICS NEWSPAPERS | WEDNESDAY, APRIL 30, 2008
Rising Food Prices Just As Painful As Gas Costs
By TOM ROBB
Journal Reporter
Pain at the pump is obvious as drivers pass gas stations and see drastic fuel prices hit unprecedented levels seemingly every day.
What might not be so obvious---but just as relevant---are the soaring prices of another staple: food.
Rory Hancock, manager of the Shop & Save food store in downtown Des Plaines, painted a grim picture of the past year and sees things only getting worse.
"I've been doing this for 30 years and I've never seen so many price changes in my life," said Hancock. "I don't see it changing until after the Presidential election."
Rising wholesale food prices and energy costs are driving up retail food costs that, combined with the meteoric rise in gas prices, leave many with few dollars at the end of the month.
Illinois Merchant's Association President David Vite said the wholesale price of corn has doubled in the last three years causing feed costs for livestock to rise as well.
Vite said the costs of milk and eggs are up 41% from one year ago, while cereals are up 21%. He said embargos and hoarding of overseas rice will soon threaten that dietary staple.
In Des Plaines and neighboring suburbs, shoppers are buying less, going from store to store to cash in coupons and downgrading the types of foods they eat.
At Shop & Save, Hancock said one year ago at Easter a carton of eggs cost shoppers between $0.35 and $0.45. The cost of eggs at Easter this year was $1.29.
Milk that was $1.99 a gallon one year ago is now selling for between $2.69 and $2.99.
Hancock said his workers occasionally find shoppers' lists in carts listing what to buy and where.
Hancock and Vite both said shoppers are downgrading the types of food they buy. Vite said shoppers are buying non-perishable foods at big box stores like Sam's Club and bargain stores like Aldi and hunting for bargains at traditional grocers.
He said shoppers are "trading down," buying generic and store brands over name brands and replacing steaks with hotdogs and ground beef.
Hancock said he has seen similar behavior at Shop & Save.
"We don't want to sell at these prices," said Hancock, but he said he has no choice. Hancock said that a year ago his store had a profit margin of 8 to 9%, now he says, "If you come out with 2% it's a good thing."
He said flour the store buys to bake its own bread cost $18 for 40 lbs. six to eight months ago. That same 40 lbs. now costs $45. As a result, Hancock raised the price of a loaf of the store's bread from $1.29 to $2.99.
While Hancock has not laid off any workers, he has cut hours, trimmed wage increases and did not replace some workers who recently left.
Vite said the average food item travels 1,500 miles.
With diesel fuel for the trucks that haul the food at well over $4 a gallon, wholesale prices are being pushed up.
Norma Malcolm, with the U.S. Dept. of Labor's Bureau of Labor Statistics, said farmers only receive 20% of the costs of food.
Hancock said that drivers are demanding fuel surcharges for each truckload they deliver to the store.
Vite added that competition between stores drives down prices.
As a result, areas with a big box retailer that will take a loss on food to get people through the door will have an effect on other stores. He said that places in which two stores are situated near one another will also have lower prices as the two battle for each customer.
Vite said that, though he knows of no recent store closings, the pace of openings for new stores has dropped off significantly, meaning less competition and possible higher prices.