Image: Grocery shopping
Matt Rourke  /  AP
A shopper looks at food at a Target in Philadelphia.
By Allison Linn Senior writer
updated 12/14/2010 2:06:53 PM ET 2010-12-14T19:06:53

If you’re looking to save money on this year’s holiday party, you may want to skip the maple ham entrée, butter cookies and veggie platters.

Instead, think about what you can do with fresh fruit and bread.

Although the cost of food in general has stayed pretty steady this year amid a weak economy, prices on certain favorites have risen sharply. That's giving some shoppers an unexpected sticker shock in the grocery aisle.

Pork prices rose 12.8 percent between last October and this one, according to the most recent data from the Department of Agriculture. Beef prices are up 7.3 percent over the same period, and butter is up a whopping 25.4 percent. Even fresh vegetables cost 4.4 percent more than a year earlier.

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The spikes are only limited to a few food groups, but the weak economy and high unemployment rate means shoppers are likely noticing them more than they would have in years past.

“Consumers, just really out of necessity, are taking a harder look at things because they know they need to,” said Tom Jackson, a senior economist specializing in agriculture for IHS Global Insight.

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Economists say shoppers shouldn’t worry that it’s the start of a broader trend. Overall food prices are projected to rise very little this year. And the Department of Agriculture says food such as fresh fruit, cereals and bakery products were slightly cheaper in October than a year earlier.

The Consumer Price Index for November, which includes overall food prices, is due out Wednesday. A more detailed look at individual food prices will be released later in the month by the Department of Agriculture.

The current situation — in which certain foods cost more because of specific issues with those items — is different from the broad food price spikes we saw in 2008. Then, food prices rose 5.5 percent across the board, crimping many families’ budgets just as a deep recession was setting in.

“It would take an unusual thing happening for that kind of inflation to occur,” said Patrick Westhoff, director of the Food and Agricultural Policy Research Institute at the University of Missouri.

Those scenarios could include a really bad crop year for basic items such as grains, or a spike in fuel prices that would affect everything from the price of manufacturing processed food to the cost of delivering it to store shelves.

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Instead, economists say it’s more likely that food prices will rise a bit more next year than this year. The Department of Agriculture is projecting that the Consumer Price Index for all food will increase between 0.5 percent and 1.5 for all of 2010, and by 2 percent to 3 percent in 2011.

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More food spikes?
Still, economists aren’t ruling out more spikes in certain types of food, because of a bad crop year, foul weather or other specific problem.

That’s what happened recently.

Jackson said pork and beef producers cut back slightly on the number of animals they raised this year, after seeing weak demand in 2009 because of the economy. When people started buying more pork and beef again this year, it was too late to expand their herds.

“They really just weren’t positioned to increase supply,” Jackson said. “You just can’t change those things that quickly.”

The tighter supply has led to increased prices.

The story of butter is more of a puzzle. Jackson said that one reason the price is up is because cows generally produced milk containing less butterfat this year. That could be partly because the corn they were fed wasn’t as good as in other years, due to adverse weather. And it may be because the milking herd was younger on average than in other years.

“We hope that’s going to turn around, particularly because the feed quality should be quite a bit better,” he said.

Still, grocers may find that other products get pricier this winter.

In the next few months, for example, Jackson said we may see cost of certain fruits and vegetables go up because of a recent cold snap in Florida and other parts of the southern United States that could harm crops.

Jackson also noted that in general the price of fruits can be very volatile.

On Tuesday, the Labor Department said the producer price index, a separate measure of wholesale food prices, rose 1 percent from October to November largely because of a a 13.6 percent spike in the wholesale cost of fresh fruit and melons.

Jackson said that steep wholesale price increase was partly because of a big drop in prices for those items in October. There could also be a November spike in fruit prices for consumers as well when that measure comes out on Wednesday, although companies may also choose to absorb that cost rather than pass it on to the customers.

In general, economists say that with many Americans still feeling pinched by the weak economy, grocers may hesitate to pass on price increases to consumers, even if their costs go up.

For example, although wheat prices rose over the summer because of drought and wildfires in Russia, Westhoff notes that it didn’t have a huge effect on the price of bread.

That’s partly because wheat is just a tiny portion of the overall cost of making and distributing bread. On average, Westhoff said, only about 20 percent of what consumers pay for food is reflected in the raw products that go into the item.

But it’s also may be that food companies fear consumers won’t pay more for bread if they do raise prices too much.

“With a weak economy retailers are going to be a lot more skittish about raising prices,” Westhoff said.

The food conglomerate Dean Foods acknowledged that problem recently when it reported disappointing third quarter earnings. Besides switching to store brands to save money, the company said in a conference call with analysts that some families are having so much trouble making ends meet that they are cutting back on purchasing even basic items such as milk.

Although the economy is technically in recovery, unemployment remains high and even many employed people are finding it tough to make ends meet because of reduced hours or salaries. The Department of Agriculture said last month that nearly 15 percent of American households were “food insecure” at least some time during 2009. That means that at some point in the year, they didn’t have enough food for everyone to eat.

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Video: Expect to pay more for your holiday meal

  1. Closed captioning of: Expect to pay more for your holiday meal

    >>> "today's" money is brought to you by bank of america .

    >> we're back now at 7:43. why food prices are soaring, the cost of everyday staples on the rise since 2008 . jean chatzky is today's financial editor. let's talk about specific prices here, we're looking at milk prices up 10%. sugar up 9%, chuck roast up 12%, price of eggs up 7%. why is it happening now?

    >> it really depends on the commodity, so you have extreme weather over much of the summer, that impacted the corn price, because that's what they eat. sugar is up because of ethanol and you have high energy prices affecting everything.

    >> the last time i mentioned in the introduction was 2008 . but we have got much more difficult economic time times, people are out of work and relying on public assistance.

    >> you're going to see the retailers, the grocery stores and the restaurants are not going to pass along all of these increases. you have had companies like starbucks announcing they're going to increase prices on the drinks that are big and difficult to make. they figure you're waying $4 for a vennte, you would pay more. consumers need to understand where these prices are going to come from. so that means paying attention to what the prices already are. when you go to the grocery store for instance, you want to know what things cost now so you can recognize an increase.

    >> you say the size of the package is very important.

    >> it actually is important. because a trick that some of these retailers will use is to shrink the size of the package, the size of the box, the size of the container and if you don't recognize that, you're going to end up paying more for the same amount of merchandise.

    >> what about store brands?

    >> we have see a lot of consumers switch to store brands, switch to generics and they're going to continue to make that switch.

    >> i'm sorry, something struck me as funny. they're going to continue to stick with the generic brands as they go.

    >> what about sales?

    >> if you can get yourself -- i'm going to kill you, you can get people to really pay attention in couponing through the circulars that you get in the sunday papers, you're going to be able to continue to get better deals.

    >> meredith is not helping me out here. i want you to know my partner is making it hard for me here. you don't have to sacrifice healthy choices for junk food .

    >> if you're looking at bringing home fruits and vegetables, things like that, those are where the prices are going to go up. look in the freezer section because they're cheaper and you can make sure that your family puts a healthy meal on the table.

    >> did you do that 124.

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