Food Costs Still Rising
And No Relief is in Sight.

Did you grill out this Memorial Day weekend? Chances are it cost you more than it did in the past.

"We've been spoiled in the U.S. and in Naperville for a while," says local grocer Dan Casey, of Casey's Foods.

American families, already pinched by soaring energy costs, are taking another big hit to household budgets as food prices increase at the fastest rate since 1990.

After nearly two decades of low food inflation, prices for staples such as bread, milk, eggs, and flour are rising sharply, surging in the past year at double-digit rates, according to the Labor Department. Milk prices, for example, increased 26 percent over the year. Egg prices jumped 40 percent.

Escalating food costs could present a greater problem than soaring oil prices for the national economy since the average household spends three times as much for food as for gasoline. Food accounts for about 13 percent of household spending compared with about 4 percent for gas.

As with energy, higher food costs cut into discretionary income that buys everything from cars to computers to movie tickets and drives the consumer-based US economy. Falling home values and a faltering stock market have battered consumer confidence, spurring a retrenchment in spending that
is contributing to recent job losses and pulling the economy toward recession.

Many analysts and local store owners expect consumers to keep paying more for food. Wholesale food prices, an indicator of where supermarket prices are headed, rose last month at the fastest rate since 2003, with egg prices jumping 60 percent from a year ago, pasta products 30 percent, and fruits and vegetables 20 percent, according to the Labor Department.

Local stores are hit hardest by these wholesale cost increases.

Retail food prices based on the Consumer Price Index for foods saw their largest increase in 17 years, 4 percent, in 2007, according to figures provided by the Food Marketing Institute, a retail trade group.

And projections for 2008 are just as dismal, with food prices expected to rise 3 to 4 percent again. Bargain hunting has become more of a mainstay as shoppers try to stretch an ever-tightening budget.

And with these continued increases local retailers, for the most part, are trying to shield customers from the brunt of the rising prices. But the stores are losing their grip and won't be able to absorb costs and keep prices down.

Longtime Naperville grocer Casey's Foods is one of those retailers.

In the 17 years store manager Kevin Killelea has worked for Casey's, he says he has never seen prices across the board inflate quite this much.

For example, last year, Casey's shoppers paid $2.29 for a bag of wheat flour; this year it's $3.28.

As local stores continue to absorb the costs, retailers are not sure how much longer they'll be able to hold on.

Lindsey Theis Reports.