Food costs soaring in US after harsh winter. Will higher prices last?
Higher wholesale food prices contributed to a jump in the producer price index in February, the US reported Wednesday. Consumers are likely to see food prices rise at least 4 percent in 2011.
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He needs to go no further than Rick's Chop House in McKinney, Texas. In early March, restaurant owner Rick Wells was shocked to pay $25 a pound for sea bass. He immediately raised his menu price by $5 to maintain his profit margin.Skip to next paragraph
In the past, his suppliers hesitated to charge more because of the sluggish economy, Mr. Wells says. "This year, my vendors are raising prices almost immediately."
For low-income Americans, a jump in food prices means food stamps don't buy as much. Groups who support food pantries feel the pressure as well. "It's scary for us; our dollars don't go as far," says Ross Fraser, a spokesman for Feeding America, a hunger-relief charity in Chicago.
Some distributors are still absorbing the price increases instead of passing them on to consumers. At the University of Virginia's large food-service network, UVA or its middlemen have absorbed the higher costs for coffee and produce, says Brent Beringer, director of food services. He hopes school will be out before the larger spike in food prices comes. "Then we will wait it out and see what happens in the fall, when [students'] meal-plan prices are set for the next year," he says.
Many food producers and restaurants are also softening the blow to their diners. Gluten-free pesto pizza, a bestseller for Simply Shari's, a national food producer based in Westlake Village, Calif., requires fresh basil – which has leapt from $3 to $6 a pound in the past month. "I cannot discontinue it," says Shari Cole. "No way I can raise my prices," she adds, noting her competitive industry. "We are really scrambling."
Some restaurateurs hope prices will start to fall once the weather improves. In Portland, Ore., Lincoln Restaurant's chef and owner Jenn Louis tries to buy as much as she can from local farmers. Bad weather kept local cows from grazing enough, sending her outlays for butter from $60 a case to $100 a case.
She hopes to adapt her recipes to lessen the financial impact. "With the price of butter up, you can absorb that if you know how to use everything else on your shelves," she says.
As rising costs mount, such adaptations will surrender to the inevitable price increases for consumers, Lapp argues. The food industry's grain expenses have increased by $40 billion since July, but it has absorbed most of those costs – so far.
"Either people in the middle will have to continue to absorb those increases or the costs will have to be passed on to the consumer," he says.