8 Reasons Your Groceries Cost More

Remember when a single brown bag of groceries cost just $10? Maybe $15 if we had expensive tastes? Now you can spend that much and more on bread, eggs and milk for one week.

The U.S. Department of Agriculture predicts overall food prices will rise four percent or more in the U.S. by the end of 2010, with some economists predicting a climb of five percent and up. Even using the government's more conservative figures, the price for eggs is forecast to rise three percent and beef by two percent. Lamb, seafood and fish all are expected to jump as much as five percent.

On the other hand, the United Nations says global food prices rose 60 percent from January 2007 to June 2008. Considering Americans spend just under 10 percent of our disposable annual income on food, the lowest average of any country in the world, that paultry five-percent increase looks fairly tolerable, doesn't it?

Here are eight national and international trends impacting the cost of your weekly groceries.

1. Meat and Dairy
Ranchers and dairy producers have been hit the hardest and will need to reduce supplies to improve their bottom line. As a result, pork, beef, chicken, dairy products and those producers dependent upon these supplies will see the biggest price increases in 2010.

2. Commodity Costs
Prices for corn, soybeans and wheat are rising because traders are speculating the recovery is coming. These increases impact nearly every food product we purchase, whether the commodity is used to feed animals, grow other crops or is an ingredient in a product.

3. Weak Dollar
The weak U.S. dollar means a lot of our excess food production is going overseas, where producers can get more money for their product, thus pushing up domestic prices.

4. Ethanol and Alternative Fuels
The U.S. enjoyed record corn production in 2009, but more than a third of that was diverted to ethanol production. Unless Congress changes the Energy Independence and Security Act of 2007, the amount of corn going into our gas tanks will increase another 25 percent over the next five years. Because cattle, chicken and hogs are fed corn and soybeans, meat producers will need to raise prices to cover higher feedstock bills.

5. Energy Prices
This one is a no brainer. Even with higher retail prices, farmers and grocers see very little increase in their profit margin. These gains are offset by higher packaging costs; energy costs to produce and stock food; and fuel to transport products. Oil prices not only impact what we pay at the pump but also what we pay at the checkout counter.

6. Spuds for Everyone
The 2009 U.S. potato harvest set a yield record for the sixth consecutive year, according to the American Farm Bureau Federation. As a result, processors paid lower wholesale prices to potato farmers, which will benefit consumers as grocers drop retail prices. An AFBA survey revealed the foods that declined the most in average-retail-price were the least-processed items. That bodes well for those who cook from scratch but not so hot for those who prefer pre-fabricated meals.

7. Global Warming?
Adverse weather patterns over the past four years have harmed crop production in Australia, southern Europe, Ukraine and parts of the United States.

8. Developing Stomachs
As incomes improve, people in such developing countries as China, India and Malaysia are eating better and placing more demand on the global food supply, forcing prices higher for a shrinking supply.

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