ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Saturday, July 13, 1996 TAG: 9607150054
SECTION: BUSINESS PAGE: A-4 EDITION: METRO
DATELINE: WASHINGTON
SOURCE: Associated Press
A SHORTAGE IN GRAIN is forcing food prices to rise. And analysts say they expect another 4 percent to 5 percent price jump next year despite wheat harvest improvements.
It's costing more to bring home the bacon - not to mention the milk, butter and bread. And, perhaps soon, fruit and beef.
Four years of relatively low food prices have come to a halt. Hot, dry weather in farm country and heavy foreign demand keep holding down supplies of American grain and other foods, thus raising prices.
Price watchers disagree over the amount, but some talk of possible 4 percent and 5 percent jumps next year. The past four years, increases have stayed well below 3 percent.
Reports Friday from the government held little promise that shortages would end despite improvements in the wheat harvest. The Labor Department said wholesale food prices took their biggest leap in more than six years in June, with fruits and red meat the cause.
Even beef prices, in a trough, are starting to push up after steps by the Clinton administration and ranchers to boost record-low cattle prices.
Store prices have definitely taken off. Bread, butter, bacon and milk all cost more than last year. Some 2 percent milk that sold for $2 a gallon last year is pushing $3 in some markets.
And shoppers like Joyce Ford say they've noticed. ``It's expensive,'' the Washington resident said as she bought groceries Friday.
Anna Pavlova, also who was buying food in downtown Washington, said, ``It's a little bit in everything. But when you add it up, it's pretty bad.''
Farm prices usually have little to do with store prices. But farm-level prices normally don't rise nearly 20 percent over a year.
Corn that brought $2.50 a bushel in June 1995 brought $4.19 this year. A bushel of wheat rose from $3.84 to $5.31.
High corn costs and hot, dry weather mean less milk, too. The Agriculture Department on Friday lowered its estimates for milk production and said prices should go up.
Big supermarket chains such as The Kroger Co. have already seen the increase. The basic raw milk price should reach $1.29 a gallon this year, up from about $1 a year ago, said John Hitchell, in charge of buying milk for Cincinnati-based Kroger. That doesn't include extra charges to recover feed costs.
``In almost all markets where we do business, milk production is down from a year ago,'' Hitchell said. ``In some cases, it's 5, 6, 7 percent down.''
The increases hit ice cream lovers last week, when Ben & Jerry's raised the cost of a pint by 10 cents, up to $2.89. Competitor Haagen-Dazs already had raised prices.
Less upscale products like plain white bread and ordinary bacon have gone up, too. A loaf of white bread cost an average of 87 cents in May, compared with 77 cents a year ago, the Labor Department says.
A pound of bacon rose from $1.92 to $2.35 in the same period. Pork production is down, in part because of last summer's heat wave. And shoppers are competing with overseas buyers - and American fast-food restaurants - for bacon.
The Agriculture Department on Friday lowered its forecasts for meat production this year and next, largely because there will be fewer hogs around.
This year's wheat crop should be better than first expected, the agency said. But much spring-planted wheat, driving the higher forecast, is still in the ground.
And corn supplies are still at 50-year lows, at a time when the new crop faces more assaults from hot, dry weather.
Economists caution that lots of items go into shoppers' baskets. Although wholesale fruit prices have risen, fruit and vegetable prices are volatile and could move down. A price war has taken the edge off cereal prices - one big-ticket item. And seafood and coffee are doing better.
``There are lots of little offsets,'' said Keith Collins, the Agriculture Department's chief economist.
LENGTH: Medium: 80 lines ILLUSTRATION: PHOTO: AP. A cutting crew rolls through a wheat field nearby CNBPerth, Kansas. Poor wheat harvests are responsible for increases in
food prices. color. Graphic: Chart by AP. color.