Corn's Ripples: Weather, Supply Issues for Key Crop Being Felt at Grocery checkouts
It's not your imagination: It costs more to fill your grocery cart this fall than it did at the beginning of spring.
Staple food items sold at the three most popular groceries in the area have risen in price over the past six months, according to Dispatch research that began in March.
Nationwide, grocery-store prices have increased 5.4 percent in the past 12 months, according to the federal Bureau of Labor Statistics.
One of the key reasons for rising prices can be summed up in one word: corn.
Corn crops have been hard hit over the past two years by adverse weather and disease that have left the price of corn at a record level, said Matt Roberts, an agriculture economist with the Ohio State University Extension.
That has resulted in higher prices across the grocery store because corn is an ingredient in foods such as cereals, breads, soft drinks and condiments. Dairy and meat prices also are expected to rise because corn is used as animal feed.
In central Ohio, that has translated into increases at Kroger, Walmart and Giant Eagle, the three chains with the highest market shares in groceries in the area. The price of a basket of 25 common grocery items on Sept. 15, the most-recent survey, was up 1.1 percent at Giant Eagle, 2.5 percent at Kroger and 3 percent at Walmart, compared with an average of monthly prices at those stores over the past six months.
A comparison of March 15 prices with those found on Sept. 15 found the increase was greater: 2.2 percent at Giant Eagle, 4.3 percent at Walmart and 7.8 percent at Kroger. Overall, according to the survey, prices were highest at Giant Eagle, followed by Kroger and Walmart.
The outlook for food prices is no better.
A record hot, dry summer that damaged much of the nation's corn crop means consumers will see food prices continue to rise into 2012, economists say.
The U.S. Department of Agriculture estimated last week that despite record corn planting by farmers this year, the yield is expected to be lower than previously projected. The USDA predicts the yield will be 12.5 billion bushels, 3.2 percent lower than its August forecast.
That will leave the nation's corn surplus at a 26-day supply for this year, which could fall to a 19-day supply by next fall, the USDA said. A 30-day supply is considered optimal.
When crop reserves are low, market prices tend to rise, Roberts said.
"Two years of disappointing corn crops have contributed to the low supply," Roberts said. Greater global demand also is a factor, he said.
For example, Russia, which has suffered from a two-year drought, stopped exporting wheat, lowering supplies of that crop, Roberts said. Bad weather and disease also affected wheat supplies from other countries, including China and Australia.
Weather problems in the U.S. also have lowered production of wheat and soybeans, two other commodities that can cause the cost of numerous products to rise.
Energy costs, particularly fuel to run farm machinery and trucks to transport goods, also have risen. Those higher costs inevitably make their way through the food system, said Ephraim Leibtag, an economist with the U.S. Department of Agriculture.
"Some increased ingredient costs can work their way through the system in as few as two to three months, with an average ... of six months," Leibtag said.
Nationwide, inflation has been stronger in food prices than across the economy, he said.
Beef has had one of the sharpest increases, up 10.4 percent in August from a year earlier, according to the latest Consumer Price Index. The price of fats and oils rose 10.7 percent; dairy products rose 9.1 percent; fruits and vegetables increased 7.5 percent; and cereal and baked goods rose 5.3 percent.
"Every chain has its own decisions to make about how to handle the higher costs, but the broader based the price increases are, stores will have to pass those costs on to the consumer," Leibtag said. "There really aren't many other choices.
"While all retailers will try to hold their prices in check, (those with more) buying power will be able to control costs more."
At Kroger, rising costs have meant looking at all its products to see how to minimize the pass-through to consumers, spokeswoman Amy McCormick said.
"Suppliers across the industry are raising the prices of their products," she said. "We try to assess how to balance those increases with our everyday low prices."
In some cases, she said, consumers are gravitating to lower-cost items, such as choosing Kroger brand products instead of national brands. Sales of its private-label products increased in the second quarter, McCormick said.
Prices at Kroger are a bellwether for central Ohio because the chain, which has 80 stores in the area, is the industry leader with a 36.3 percent share of the market, according to data from Scarborough Research.
For Giant Eagle, the changing climate has led to negotiating lower prices with manufacturers, working to reduce utility costs and improving efficiencies, said Kevin Srigley, the chain's senior vice president of merchandising.
Pittsburgh-based Giant Eagle, which has 39 stores and fuel centers in central Ohio, is the third-most frequented grocer, with 13 percent of the market, according to Scarborough.
"We continue to work hard in this inflationary environment to pass on as little price increase" as possible, he said.
He said programs such as double coupons, its food and fuel perks programs -- which offer discounts on gas or groceries based on the amount spent on the other category -- are ways that Giant Eagle tries to help its customers save money.
"We've found that our customers have been very appreciative (of the programs) and have been grabbing those perks where they are able to," Srigley said.
Walmart did not return repeated calls for comment. The chain, which has 20 stores in central Ohio, is the second-most-shopped chain for groceries, with 20.1 percent of the market, according to Scarborough.
Although prices have gone up in central Ohio, shoppers here are faring somewhat better than those elsewhere in the state. The region's extremely competitive grocery market is the major contributing factor, said Nate Filler, president of the Ohio Grocers Association.
As a result, grocery prices in central Ohio tend to rise in steps rather than jump overnight, Filler said.
"Without question, Columbus is one of the most-competitive marketplaces in the U.S.," he said. "You've got a lot of heavy hitters (in the region) going after the same consumer dollars."
