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Some painful food for thought: grocery prices surging

By Kathleen Pierce
Globe Correspondent / February 26, 2011

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Besides soaring costs for gas and travel, the latest pain to hit consumers is at the dinner table.

US food prices are expected to jump between 3 and 4 percent this year, about twice the general rate of inflation, after rising last year by the slowest rate since 1962, according to a Department of Agriculture forecast this week. The increase is due to unusually inclement weather, high worldwide demand for US agricultural commodities, and rising gas prices.

Some local supermarkets are passing along those costs on everything from vegetables and wheat to fruits and meat to consumers, many of whom continue to pinch pennies during the jobless recovery.

Food prices have risen significantly in recent months, helping to push the average food bill in America up 10 to 20 percent over what it was a year ago when the rate of food price inflation was low, some analysts say.

“It’s insane,’’ said Pearl Lumbard , a 53-year-old Burlington grandmother who recently was inspecting Romaine lettuce, which jumped from 99 cents a head to $1.99 in a week at her neighborhood Market Basket. “I came in the other day and it was like ‘Holy Hannah Montana.’ ’’

DeMoulas Super Markets Inc., the Tewksbury-based chain that owns 65 Market Basket stores in Massachusetts and New Hampshire, said the increase comes as it is paying $40 to $50 for a box of 24 heads of iceberg lettuce from wholesalers, compared with $15 to $20 two weeks ago. Romaine lettuce and grape tomatoes have doubled in price at Market Basket, and last week iceberg lettuce was unavailable at some stores.

“This is a no-win for anyone that purchases fresh produce. The customer has to pay more for less: Isn’t that the new mantra?’’ said Michael Maguire, director of produce for Market Basket.

Maguire, who has worked in produce for 40 years, said that this year “ranks right up there with the worst.’’

Deep freezes that struck Mexico, California, and Arizona this month and Florida in December destroyed entire crops of staples such as tomatoes, lettuce, and bell peppers. The smaller supply translates into higher prices.

At the same time, commodities like corn, wheat, soybeans, and meat have risen dramatically. For instance, prices of corn, wheat, and soybeans are up 88 percent, 76 percent, and 37 percent, respectively, from the a year ago. That eventually translates into higher food prices for consumers.

Wheat prices surged after last summer’s drought in Russia, the world’s largest exporter of the grain. Corn and wheat, which are used in feedstock, are in greater demand with worldwide population growth, and meat prices have been rising because of the higher cost of livestock feed. Soaring oil prices are making transportation and packaging of food more expensive as well.

The higher prices mean that supermarkets and restaurants have to absorb the costs or pass them down to consumers.

Tony Russo, third-generation owner of the Watertown fruit and vegetable purveyor A. Russo & Sons, said he has had to increase prices to his hundreds of wholesale customers across New England, from local sandwich shops to high-end hotels.

Earlier this month, Russo could buy a box of 36 heads of Romaine hearts for $18, but this week, it was $45. As a result, he raised the price of Romaine this week from $1.98 to $2.49 and is contemplating another increase to $2.98 a head. A pound of zucchini was $1.49 earlier this week; it is now more than $2.49.

“This is serious stuff,’’ he said. “It’s been a terrible two months of business. I can’t remember when we’ve paid this much for this long of a period of time.’’

The food price increases are hurting consumers, too. Food is a big expense for Americans, accounting for about 8 percent of the average household’s annual expenditures, according to a 2009 report from the Bureau of Labor Statistics — the latest available. Americans spent more than $3,500 annually, or about $72 a week, on average in 2009 on groceries.

Nariman Behravesh, chief economist for IHS Global Insight in Lexington, said the average US food bill is 10 to 20 percent higher than it was a year ago. “It’s a combination of bad weather and bad policies,’’ he said, referring to a worldwide ban on grain exports in Russia and India.

Ephraim Leibtag, deputy director for research at the Economic Research Service, a division of the USDA, said that food price inflation is expected in a “well-functioning economy,’’ but can be a problem in a fragile one.

“With wage growth, that would be OK, but even though the recession is over, people are not going back to work —that’s another challenge,’’ said Leibtag, adding that categories such as beef have risen 10 percent year to date in January. “People can’t buy as much.’’

In the last few months, Lexington resident Johanneke De Vries’s weekly grocery bill — which includes lots of fresh produce — has risen from less than $150 to $180 for a family of five. To cope, she doesn’t buy new clothes and hardly ever dines out.

“It makes me feel bad for people who can’t afford this anymore,’’ she said.

Tanya Serrao also feels the food price pressure. To lessen the financial strain, the 39-year-old mother of two from Arlington started buying large bags of flour from Costco to bake bread instead of shelling out $4 for loaves. But sometimes she has to grab bread off the shelf.

“Everything is inching up,’’ Serrao said. “Three or four dollars for a loaf of bread is crazy. But you’ve got to make the school lunches.’’

Analysts say that consumers may have to get used to the higher prices on some foods. “It will be a rocky road for a while,’’ said Gary Lucier, an agricultural economist for the USDA.

But not every vegetable has been affected by the price hikes. “Potatoes, onions, sweet potatoes, cabbage, and any kind of root vegetables that have been in storage are an alternative,’’ Lucier said.

And of course, not every business is passing along the high costs to consumers.

The staples of Jimmy Burke’s Orta Restaurant in Pembroke, such as Roma tomatoes and eggplant, have soared in price this winter.

But Burke has not shared the pain with customers of his Italian restaurant.

“I call up my produce guy every day and say, ‘What the hell is going on here? When is this going to change?’ ’’ Burke said. “You can’t do anything to your price structure. People won’t understand that or accept it. You bite the bullet and hope that things change.’’

Instead of raising menu prices, Burke is trying to be creative: The price of swordfish and tuna has increased, so he is considering subbing the popular fish with less expensive offerings like skate wings or mahi mahi. But he said his options are limited: He cannot jack up the price on a salad because customers would not accept that.

“It’s not like fish and meat where you can say market price,’’ he said.

Kathleen Pierce can be reached at kmdpierce@gmail.com