May 24, 2008

Prepare to burn more money on holiday barbecues as food costs climb

NEW YORK -- Hamburgers and hot dogs? Check. Lighter fluid? Check. Beer? Check. More money?

People are about to fire up their barbecues for the start of the summer cookout season, and one thing has become painfully apparent: It's going to cost a lot more than it did last year to roast a burger, or just about any other barbecue favorite, on the grill.

Food inflation is the highest in almost two decades, driven by record prices for oil, gas and mounting global demand for staples such as wheat and corn, and for proteins such as chicken. And that's reaching into Americans' back yards.

The price of an average barbecue -- with burgers, hot dogs, beer, soda, condiments, salad, paper plates and lighter fluid -- could run families about 6 percent more than last year.

That's making shoppers pause as they fill their carts for Memorial Day weekend, the unofficial start of the barbecue season.

"I'm finding myself questioning every purchase, wondering if it's gonna get eaten or if we really need it," said Tony Caballero, an advertising and marketing consultant, as he filled his cart with paper plates at a Food Emporium in New York City.

"When you do your everyday shopping, you try to cut corners. But it's a shame to have to scale down when you're trying to throw a party."

But it doesn't stop grill gurus such as Steve Matthews, who said a price spike doesn't stop him from donning an apron and wielding a pair of tongs.

"The cost hasn't changed the fact that I've used my barbecue almost every day," said Matthews, of Modesto.

He cooks on three grills and two smokers, and uses them to barbecue everything from meat to vegetables to pizza.

"It's like with grocery shopping any place," he said of higher prices. "You just have to shop around and look for the deals."

The consumer price index for food rose 4 percent last year, compared with an average 2.5 percent annual rise for the past 15 years. On Monday, the U.S. Department of Agriculture raised its forecast for next year by half a percentage point, to a range of 4.5 percent to 5.5 percent.

Basic economics account for most of the increase: Bad weather has hurt crops, economic prosperity has driven up demand in developing countries, and surging fuel prices have raised transportation costs.

Economists and food scientists have argued that biofuel production is a major factor in rising food costs, particularly corn, and that it should be scaled back. Meat and poultry executives have come out against federal ethanol mandates, which they say is driving the cost of corn higher.

Carol Tucker-Foreman, food policy expert at Consumer Federation of America, said high-fructose corn syrup can be found in just about anything you'd find at a cookout or picnic.

"The backyard barbecue is where you'll see the most impact from the government's decision to subsidize the use of food to put fuel in our cars," she said. "From the ketchup to the paper plates, these are the things that are going to cost you a lot more than they used to. And this is just the beginning. Next year, it'll be even more expensive just to stay home and make burgers."

Thomas Elam, an agriculture consultant and owner of Indiana-based FarmEcon LLC, said retail prices for chicken and turkey saw the first increases, with the per-pound price for chicken up 30 to 40 cents from a year ago.

Poultry prices have gone up first because the production cycle for that commodity is quicker, Elam said.

But the push for ethanol, which largely is derived from corn, is pushing up grain prices across the board, Elam said. That means higher prices for consumers, sooner or later.

"We may have moved to a new permanently higher cost of production," Elam said. "It's the foods we consume more in a raw form that are affected by these prices, and they're going to be pretty heavily affected."

Time to search for bargains

The debate is moot for many U.S. families who already are struggling to put gas in the car, pay the mortgage and put food on the picnic table.

This year, the price for a pack of hot dogs has climbed almost 7 percent to $4.29. A 2-liter bottle of soda and a 16-ounce bag of potato chips jumped more than 10 percent to $1.33 and $3.89, respectively, while a package of eight hamburger buns costs $1.61, 17 percent more.

The surge in prices is forcing people to try to cut corners and find bargains where they can, such as buying store brands.

A recent study by the Food Marketing Institute found that about a third more shoppers are limiting themselves to frozen or boxed foods instead of fresh items this year, while nearly half said they bought fewer foods overall.

But 55-year-old Cherise Tilly, who lives with her mother in Cincinnati, said she still buys more expensive items such as steak, ribs or chicken for grilling along with relatively cheaper meats including hamburgers and hot dogs.

"My mother keeps worrying and says we need to cut back more, but getting together with friends to eat is one of the pleasures in life," said Tilly while shopping at a Kroger store.

Other shoppers may be more reluctant to indulge, and those paying close attention to prices in the aisles may worry they're being gouged by grocers, said National Retail Federation spokesman Scott Krugman.

"Consumers don't care why prices are increasing, they just want something to be done about it," Krugman said. "What they don't realize is how razor-thin profit margins are in terms of price increases on grocers, as well."

While beef prices have been high, chicken and pork prices are expected to rise as producers are feeling the brunt of higher costs for feed and fuel.

Scott Faber, a lobbyist for the Grocery Manufacturers Association, has criticized ethanol production. The group has been pushing Congress to increase research about making ethanol from inedible plant matter, such as wood chips, cornstalks and rice straw.

Faber said prices for meat will continue to rise in the next couple of years. Newly enacted federal ethanol mandates will drive the cost of corn higher, he said.

"We are just in the beginning of a period of significantly higher prices, and American families will continue to feel that impact as the cost for basic staples like milk, meat and eggs will grow dramatically," Faber said. "This holiday weekend surely reflects that."

Bee staff writer Ben van der Meer contributed to this report.

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