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<< Previous   of   Next >> Associated Press  (click to enlarge) Owner Sam Iliewat talks with a customer at his Wonder Bagels store in Jersey City, N.J., on Monday. Iliewat recently posted a letter from the store's wheat supplier to help explain the increases in food prices to his customers.   ADVERTISEMENT   Related Stories • What's missing from the buyer's guide 4/15/08   CONTACT THE HERALD Mike Benbow, Business Editor benbow@heraldnet.com   Published: Tuesday, April 15, 2008 Costs hammer U.S. food sellers Food inflation rises at fastest pace in 17 years Associated Press NEW YORK -- Steve Tarpin can bake a graham cracker crust in his sleep, but explaining why the price for his Key lime pies went from $20 to $25 required mastering a thornier topic: global economics. He recently wrote a letter to his customers and posted it near the cash register listing the factors -- dairy prices driven higher by conglomerates buying up milk supplies, heat waves in Europe and California, demand from emerging markets and the weak dollar. The owner of Steve's Authentic Key Lime Pies in Brooklyn said he didn't want customers thinking he was "jacking up prices because I have a unique product." "I have to justify it," he said. The U.S. is wrestling with the worst food inflation in 17 years, and analysts expect new data due Wednesday to show it's getting worse. That's putting the squeeze on poor families and forcing bakeries, bagel shops and delis to explain price increases to their customers. U.S. food prices rose 4 percent in 2007, compared with an average 2.5 percent annual rise for the last 15 years, according to the U.S. Department of Agriculture. And the agency says 2008 could be worse, with a rise of as much as 4.5 percent. Higher prices for food and energy are again expected to play a leading role in pushing the government's consumer price index higher for March. Analysts are forecasting that Wednesday's Department of Labor report will show the Consumer Price Index rose at a 4 percent annual rate in the first three months of the year, up from last year's overall rise of 2.8 percent. For the U.S. poor, any increase in food costs sets up an either-or equation: Give something up to pay for food. "I was talking to people who make $9 an hour, talking about how they might save $5 a week," said Kathleen DiChiara, president and CEO of the Community FoodBank of New Jersey. "They really felt they couldn't. That was before. Now, they have to." For some, that means adding an extra cup of water to their soup, watering down their milk, or giving their children soda because it's cheaper than milk, DiChiara said. U.S. households still spend a smaller chunk of their expenses for foods than in any other country -- 7.2 percent in 2006, according to the USDA. By contrast, the figure was 22 percent in Poland and more than 40 percent in Egypt and Vietnam. In Bangladesh, economists estimate 30 million of the country's 150 million people could be going hungry. Haiti's prime minister was ousted over the weekend following food riots there. Still, the higher U.S. prices seem eye-popping after years of low inflation. Eggs cost 25 percent more in February than they did a year ago, according to the USDA. Milk and other dairy products jumped 13 percent, chicken and other poultry nearly 7 percent. USDA economist Ephraim Leibtag explained the jumps in a recent presentation to the Food Marketing Institute, starting with the factors everyone knows about: sharply higher commodity costs for wheat, corn, soybeans and milk, plus higher energy and transportation costs. The other reasons are more complex. Rapid economic growth in China and India has increased demand for meat there, and exports of U.S. products, such as corn, have set records as the weak dollar has made them cheaper. That's lowered the supply of corn available for sale in the U.S., raising prices here. Ethanol production has also diverted corn from dinner tables and into fuel tanks. Soybean prices have gone up as farmers switched more of their acreage to corn. Drought in Australia has even affected the price of bread, as it led to tighter global wheat supplies. The jump has left people in the food business to do their own explaining. Twin Cafe Caterers in lower Manhattan posted a letter on its deli cooler: "Due to the huge increase of the gas, the electricity, the water and all the other utilities, we had to raise the prices a little bit." It went on to say that all its food prices have risen, too.

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