Why Grocery Prices Are Up
WASHINGTON – The cost of U.S. groceries will jump another 5 percent or more this
year, after a 5.6 percent increase in 2007, the Kiplinger Agriculture Letter
reports. Usually, food prices advance between 2 percent and 3 percent annually.
But consumers should look beyond higher corn, soybean, wheat and other field
crops as the source for the increased prices. Transportation costs have risen 9
percent overall during the past year, which trickle down to food prices.
Also contributing to the hikes are costlier imported food, largely more
expensive because of the weak American dollar. The U.S. imported foods index had
a 13 percent rise in prices over the past year, which gave a boost to the prices
for coffee, fish, wine, bananas, peppers and other imported products.
Add to that mix rising debit- and credit-card fees that retailers must pay,
which then are passed on to customers. Bill Greer, a spokesman for the Food
Marketing Institute, pointed out that in the early 1990s, such fees were only 1
percent of the grocery bill, but now those fees average approximately 2 percent
nationwide. That percentage exceeds grocery stores’ gross profit margins of an
estimated 1.9 percent.
Overall, the cost of milk has risen 30 percent; flour, more than 25 percent;
eggs have jumped 24 percent; and margarine, 20 percent. There is some good news,
however. Some foods, such as oranges (down 35 percent), are actually dropping in
price, while others, such as sirloin and sugar, have remained steady.
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