Rising grocery costs eating up consumers' budgets

Nicole Martens of West Fargo has not been able to stay within her grocery budget for the past couple of months.

She runs a child care business, has a family of five and has been forced to adjust her budget to account for rising food costs.

"It's either that or cut back on healthy foods and I'm not willing to jeopardize my family's quality of food intake at this point," Martens said. "But if they keep rising as they have been, I will have no choice."

Grocery and restaurant prices are forecast to rise 3 to 4 percent due to higher food commodity and energy prices, and strong global demand for food, according to the U.S. Department of Agriculture 2011 Food Price Outlook.

After years of quiet on the inflation front, a six-month spike in the price for grain, meat, dairy, energy and oil is hitting the U.S. food system. The wave hasn't hit consumers full-on, but it's coming.

Corn prices have doubled in six months, wheat prices are up 32 percent, and milk prices are up 21 percent.

Food inflation was stable in 2010, inching up just 1.5 percent in 2010, the Consumer Price Index shows. But in January, food prices rose 0.5 percent for the month, and "all six major grocery-store food groups posted increases," the U.S. government reported.

Analysts cite a dozen reasons raw commodity prices have risen so far, so fast.

The economic recovery is lifting demand. Unrest in oil-producing nations is making markets jittery. And ethanol continues to gobble up corn.

Extreme winter weather is also to blame, said Tom Woodmansee, president of the North Dakota Grocers Association.

Crops were damaged or lost when Southern states experienced the coldest winter they've had in years, he said.

Consumers are feeling the pinch.

Lisa Woodbury of West Fargo said her grocery bills have more than doubled in the past 10 years.

"We are told to eat healthy, only to be hit with outrageous prices on produce or other healthy foods," she said. "Who can afford to eat healthy?"

Grocers are trying to curtail price increases, but the more they rise, the harder that becomes.

While the price of domestic rice hasn't increased yet, Joe Hoglund, manager of Tochi Products in Fargo, said the price of imported rice has gone up at least 10 percent.

Fred Wangler, who owns Wangler Foods grocery stores in Casselton, Kindred, Buffalo and Tolna, N.D., said every week something is going up. Produce, especially, has taken a big jump.

"We're trying to watch our prices as far as what we're charging customers," he said. "But, we also still have to make money on the produce to keep our doors open."

Local restaurants have been eating rising food costs to spare their customers, but officials say they can't do it indefinitely.

Jim Mercil, who owns the Speak Easy restaurant in Moorhead, said he hasn't raised prices yet, but his food costs are increasing.

"We're looking at at least between 9 and 12 percent," he said.

Restaurateur David Scheer said if a vegetable is expensive one week, the restaurant may have to cut back a bit or substitute a different vegetable. Scheer has ownership in Thai Orchid in Moorhead; Leela Thai, Wasabi Sushi and Drunken Noodle restaurants in Fargo; and Little Bangkok in East Grand Forks, Minn.

"So far we've been able to handle it by substitution and simply absorbing it," he said, "but it won't be too long and we'll have to just increase prices. It's a necessity."

Ryan Johnson is a reporter for the Grand Forks Herald

Readers can reach Forum reporter Tracy Frank at (701) 241-5526