Food companies to feed us higher costs
Sara Lee, Tyson, Kraft and other name-brand food companies are hiking prices on everyday products from cheese to cold cuts. Jeff Tyler reports on how this will hit Americans in the gut.
Elinor Mantin shops for groceries at Lorenzo's Supermarket in North Miami, Fla. (Getty Images)
More on The Economy, Food
TEXT OF STORY
KAI RYSSDAL: Once you're clear what's safe to eat and what's not, get ready for some more sticker shock at the supermarket. We're learning that food companies can't eat the costs of more expensive ingredients and fuel anymore, and they're about to raise prices again. By a lot. Marketplace's Jeff Tyler has the latest on food inflation.
JEFF TYLER: Sara Lee makes Jimmy Dean sausages. It says prices on meat products could rise up to 20 percent by the end of the year. Kraft Foods has signaled that prices for some of its cheeses could jump 25 percent.
Erin Swanson: The packaged food companies continue to be hit with rising commodity costs, and as a result they have been, as a group, passing those increased costs on to consumers through rising prices.
That's equity analyst Erin Swanson with Morningstar. Between the weak economy and higher food prices -- they're up 5 percent in the past year -- consumers are cutting back. Swanson says that's been hard on food companies that sell to restaurants and grocery stores.
Swanson: In their food-service business, they'd seen that business shrink -- meaning that people were favoring eating at home versus eating out.
So far, grocery stores have been reluctant to pass along big price increases to consumers.
Economist Ephraim Leibtag is with the Agricultural Department's Economic Research Service. He says shoppers will be paying more for beef, pork and poultry.
Ephraim Leibtag: In terms of going forward -- end of this year into 2009 as well -- we're going to see higher meat prices. Because a lot of corn that is produced in this country goes toward animal feed. And that takes a few more months to kind of get through the system.
Leibtag expects the price of beef will increase 6 to 7 percent next year. As meat prices rise, analysts expect consumers will increasingly find substitutes for what's for dinner.
I'm Jeff Tyler for Marketplace.
Comments
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From OR, 07/22/2008
I don’t think we’re learning that packaged food corporations “can’t” eat the costs of more expensive ingredients but that management believes they can maintain or boost margins by passing them along. In any case, this is not attributable to commodity prices generally because that covers a lot of terrain but to the distortions created by legislation for corn-based ethanol. Essentially, the greater political clout of mid-west politicians realized that they could use the energy independence and global warming concerns to do for farmers what mid east oil was doing for Big Oil. They were right.
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