How inflation is eating away at family food budgets

The grocery store cash register is doubling as a vacuum.

By InvestorPlace Sep 29, 2011 10:40AM

By Jeff Reeves, InvestorPlace.com


Inflation is the untold story of the economic downturn. While unemployment, foreclosures and government debt make plenty of headlines, it's startling to consider the slow and steady ascent of consumer staples. Inflation is driving up things like beef, soft drinks, grains and milk.


There are ways to hedge your investment portfolio against inflation, such as the best inflation investments I highlighted recently in a separate column. But there is little you can do to cut back the grocery bill as food prices continue rising.


Haven't noticed how bad inflation has gotten at the supermarket? Well, here are nine ugly instances showing how much damage inflation is inflicting on family budgets:


1. The U.S. Labor Department reported recently that consumer prices were up 0.4% in August. That's a 3.8% rate for the full year and the hottest pace of inflation since November 2008.


2. J.M. Smucker Co. (SJM) announced it will hike Jif peanut butter prices 30% starting in November, thanks to a weak peanut crop. That will really stick in the craw of soccer moms.


3. In New York City, ground chuck prices are up 18% this year to $3.99 a pound, according to the New York Post. As a result, "the price of the lowly hamburger is expected to surge by as much as 32 percent over the next several months." Think things are better outside Manhattan? Nationwide, the USDA estimates beef prices will be up 8% to 9% in 2011.

4. Lest you think beef is alone, pork prices also are inflating briskly -- 7.5% above levels seen last August. The phenomenon actually has pushed up pork prices so much so that pig theft is more common in the Midwest. Watch out, Wilbur.


5. The USDA also raised its inflation forecast for eggs recently, from 5% to 6% this year. Not a good sign, considering eggs are one of the most affordable sources of protein in the supermarket.


6. Solae, a joint venture between chemical powerhouse DuPont (DD) and agribusiness giant Bunge (BG), develops soy-based foods and nutrition products. Inflation in soy prices has resulted in an 8% price hike for Solae's products, ranging from snacks to supplements to infant formula. It's the second time Solae has raised prices this year. The company has tried to spin it by citing "extraordinary global demand"and saying soy prices aren't rising as fast as beef prices, but that's not much of a consolation to shoppers, even if it is clever marketing.

7. Coca-Cola (KO) has made a shrewd move this month, announcing it will sell a 12.5-ounce bottle of Coke for 89 cents. That product launch, under the guise of smaller portion sizes, allows Coca-Cola to raise the price on its 16-ounce bottle to about $1.19 over the next few months and prop up profit margins.


8. Despite the fact that milk output in August was up more than 2% from a year ago, the USDA reports that this year's average milk price is expected to set a record $20.40 per hundredweight -- up more than $4 from last year for a roughly 25% jump in milk prices.


9. In 2011, the USDA projects the price index for all food will increase 3% to 4%. That breaks down with "Food-at-home (grocery store) prices are forecast to rise 3.5% to 4.5%, while food-away-from-home (restaurant) prices are forecast to increase 3% to 4%."


On top of that, 2012 projections are for another food-at-home price increase of 3% to 4%.



Jeff Reeves is the editor of InvestorPlace.com. As of this writing, he owned none of the aforementioned stocks. Write him at editor@investorplace.com, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook.




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12Comments
Sep 29, 2011 11:30AM
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What inflation?  The government denies that inflation is a problem...just ignore the upward change in prices you see at the grocery store.
Sep 29, 2011 12:27PM
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Yeah...... it's funny how the things that people buy most often are the same items the government leaves out of it's inflation indexes. 
Sep 29, 2011 1:45PM
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If we used the same method to calculate inflation now as we did in 1980 it would be close to 9%. 

 

The reason the government doesn’t recognize today’s inflation is because they skewed the numbers using pseudo-science when the implemented the recommendations of the Boskin Commission. 

 

This was their way of cutting Social Security.  They manipulated the inflation numbers to keep CPI increases far lower than they should be.  As a result Social Security checks today are half what they would be if we used the same method to calculate inflation as we had in 1980.

Sep 29, 2011 12:21PM
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Eggs:  maybe a year ago I was paying about $1.10/doz.  Today, they run $1.99/doz.    Butter also increased about 33% in one year.  Same thing with milk.  Now, the prices at Aldi seem too high-----when THAT happens, you need to be worried.
Sep 29, 2011 12:07PM
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americans could probably stand to cut back on their food consumption a few percent....That would solve several problems at once.
Sep 29, 2011 1:06PM
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careful to check size and amounts at aldi...they seem to be able to downsize their packaging quicker than others...so the hit is double whammy price up - size down...this is true of national brands also but they're slower...of course the main caution at aldi are the other shoppers...an incident could be costly.
Sep 29, 2011 2:52PM
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I think its criminal of many states to actually charge sales tax on FOOD of all things.
Sep 29, 2011 4:25PM
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The industrial food machine is bucking and jerking. The self sufficient folks who grow their own food and do the homesteader thing will be getting the last laugh.

I must say i don't see a good future here. It may be time to learn how to grow your own.
Sep 29, 2011 1:34PM
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   We know big banks have been driving up the price of gas by manipulating the commodities market. Wonder if they have been doing the same with other essentials like food? These lowlife pigs will do anything and our government will do nothing to stop them.

   Goldman Sachs and others have done more harm to America than all terrorist combined. We need to surround them with protesters. Force them to bring out machine guns then ,maybe some will recognize what these lowlife scum really are.

   God bless the young protesters in NY. Hopefully, they will be the start of something big. Ten or twenty million in the streets with good leadership and specific demands may be our only hope. We need to support and defend these young people every way possible.

 

 

Sep 29, 2011 9:19PM
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$7 CORN IS WHAT IS CAUSING THIS Thanks to government subsidized ethanol,,that we burn 10% ..and make 10% less mileage. this is the biggest folly of my lifetime....farmers are planting every bit they can to corn...thousands of acres of pasture are being broke and farmed...the cows get sold.
Sep 30, 2011 12:44AM
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And the gov plans on cutting foodstamp allotments for the recipients...that is real smart considering the monthly amount was already to low & they don't seem to factor in real life costs on utility bills or credit your actual rent/mortgage payment, nor do they even include transportation costs for work.  The idea was to have foodstamps as an additional assistance to the cash/paycheck money to have food in the home for a month--but anymore, ALL paycheck money is going to utility bills, rent, & gas to get work with nothing left over to buy groceries.  So, those who are struggling are now stuck with only the amount of foodstamps for the given month to buy food.  Unfortunately, with the price of food going up...foodstamps covers very little of a food budget for anybody.  And I agree with a fellow poster on here, they did change what they include in the COLAs so that they would not have to increase ANY benefits to anyone, nor increase the poverty levels to reflect reality which would show that a much larger population percentage is poor in this country & thus, eligible for assistance as well.  Heads in sand...
Sep 29, 2011 4:39PM
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profit margins, that is all that these company's are worried about. never mind the very people that supported these company's over the years,now can't afford to buy their products. Americans are hurting all over this country, and food company's are raising prices? Cut your profit margins,let all the company big-wigs take a lesser salary there are many ways company's can off- set prices to the consumer besides raising prices. Think what would happen to a company that thought about the stuggles that are going on in our country and refused to raise prices , they'd have my loyalty!
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