Nov 27, 2008 6:10 pm US/Eastern
Cause Behind Rising Grocery Prices Debated
Fuel And Commodities Like Corn Wheat Have Dropped In Price, But Checkout Bills Remain High
CHICAGO (CBS News) ―
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Grocery prices started rising last year when corn, wheat and other commodities shot to record highs. Grocers blamed the ethanol industry's use of food for fuel, but ethanol supporters are firing back.
Stephen Chernin/Getty Images
For Sarah Randall, grocery shopping used to be about what to put in her cart. Now it's about deciding what to keep out.
"When I check out, it's definitely more expensive than it used to be," she said.
For many Americans, checkout at the grocery store amounts to a gut check, CBS News correspondent Cynthia Bowers reports.
Grocery prices started rising last year when corn, wheat and other commodities shot to record highs. The grocery industry blamed the ethanol industry's use of food for fuel. Now ethanol supporters are firing back.
"Corn is back down 50 percent lower than it was just five months ago, so why hasn't the price of food come down?" asked Sen. Charles Grassley, R-Iowa.
Because even though corn is now selling for less than half what it did in June, the Thanksgiving turkey that feeds on that corn costs you 8 percent more a pound.
The wheat baked into the dinner rolls is down 60 percent, but the rolls are up 16 percent.
And the soybeans in your pumpkin pie crust? Down 47 percent since summer, but your cost is 9 percent more.
Experts say that's because grocery pricing is about much more than just commodities.
"Raw commodity costs represent about 20 percent of the total food bill at the grocery store. The other 80 percent represents all the other costs that are involved getting food from the farm to the grocery store," said Scott Irwin, an agriculture economist at the University of Illinois.
Those are things such as labor, processing, packaging, transportation and advertising.
According to the USDA, those components are:
- 48 percent labor
- 10 percent packaging
- 10 percent transportation
- 6 percent profits
- 28 percent other, including advertising promotion, taxes, depreciation and interest
One regional grocery chain, Wegman's, is eating into its own profits to help its customers put affordable food on the table now - by cutting prices 5 percent throughout the store.
"We just thought our customers needed a break, because times are tough and all," said Bob DiTiullio, a manager at Wegman's.
Even if prices come down in a few months, there is more heartburn on the horizon.
The USDA is predicting another 5 percent food increase for next year.
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