Gas And Ingredients Are Cheap, So Why Are Grocery Prices Rising?

With the the cost of ingredients, gas prices, and interest rates dropping, why are food manufacturers continuing to hike prices and shrink products? According to the L.A. Times, supermarkets don’t know, but they’re as pissed as we are.

We noted in July that food prices were expected to rise. The justifications offered by the companies at the time were that the price increases were necessary due to the rises in the cost of production and commodity prices.

When we wrote that post, gas was about $4 per gallon. The price has fallen dramatically since September, to around $2 per gallon, about what it was in 2005. So fuel costs are no longer a justification.

The Times article cites a few examples of products whose main ingredients have also decreased in price, yet the products themselves have gotten more expensive (and gotten smaller). Kraft macaroni and cheese, for instance, went up by 9% this year, even though cheese and wheat prices have dropped by 38-68%. There’s a chart that lists the drops in commodity prices over the last year; pretty much everything but chicken wings and pineapples have decreased in price.

Manufacturers blame the price increases on futures contracts they unwisely bought, and now they’re paying too much for cheapened ingredients. Bad speculation strikes again!

Grocers, name-brand food producers at odds over prices [L.A. Times]
(Photo: billadler)

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  1. tc4b says:

    There must be a reason, or else wouldn’t the one manufacturer who lowered prices to reflect cost just pwn all the others? I know I’m a bargain shopper these days. My brand loyalty went out the window several months ago!

    • catnapped says:

      @tc4b: No real reason for any of them to…you do need to eat, don’t you?

      • bohemian says:

        @catnapped: This is exactly why the govt. needs to investigate this. It does appear to be some serious price fixing or collusion going on with food manufacturers.

        Edy’s has shrunk their ice cream cartons so much they are just slightly larger than a single serving.

    • raincntry says:

      The reason is that the manufacturers know that we will pay for their product at the higher price. @tc4b:

  2. Anonymous says:

    I think its also a way that big firms can protect themselves from inflation without blatantly saying thats what they are doing. Someone should call them out! Large firms who preemptively raise prices on expected inflation contribute considerably to the pressures that actually causes inflation.

    • t-r0y says:

      @LoisAbadon: You’ve got the cause and effect backwards. Inflation is cause by the increase in the supply of money and credit, and that, in turn will cause prices to increase.

      • targaryen says:

        @t-r0y: You’re both right. Inflation has multiple causes and cannot be simply ascribed to the increase in available money. Scarcity of goods will also drive the price higher, as well as having more money readily available.

      • SynMonger says:

        @t-r0y: So inflation causes inflation? You get a gold star!

      • Anonymous says:

        @t-r0y: @t-r0y: @t-r0y:
        My understanding is that increases in the money supply and available credit increase the monetary base which is turn causes each dollar to be worth less so firms raise prices to off set this devaluing of each dollar. However there is also the creation of inflationary pressure when firms and labor unions expect inflation to increase, say in response to a stimulus bill, and raise their prices or negotiated wages in contracts. Which causes other firms to have higher costs and need in turn to raise their own prices or demanded wages. SO ……. inflation is very possible without any actual increase in the monetary base, but because of firms or unions preemptively reacting to expected changes in inflation! Greenspan lived off this idea for years.

        • t-r0y says:

          @VaughanDove: This is a matter of symantics. What you’re describing is price inflation, where as I’m talking about the classical definition of inflation, or monetary inflation if you like.

          My point, with regards to the original post, is that monetary inflation causes prices to rise (for the reasons you stated), not the other way around. There are other reasons for prices to go up (cost of goods, cost of labor, increase in demand), but price increases do not cause monetary inflation.

          • TechnoDestructo says:

            @t-r0y:

            Price inflation is when prices go up, it doesn’t matter if it has any effect on the money supply, it doesn’t have to be caused by inflation of the money supply.

            If it did, purchasing power parity would never change.

  3. the Persistent Sound of Sensationalism says:

    Why do we continue to support the corporate economy which is based on gambling? Maybe lawmakers have been wise to attempt the outlaw of gambling in all forms.

    • Maurs says:

      @Persistence: Well, I mean, that sort of gambling is kind of how capitalism and the stock market and entrepreneurship works. You take a gamble investing in a company, starting a business, buying wheat futures, etc. etc.

    • wildhare says:

      @Persistence: Amen to that. I consider it economic terrorism myself.

    • Erwos says:

      @Persistence: “Gambling” could also be called “risk-taking”. Do you really want to outlaw the ability for companies to take risks? Because, frankly, we’d all probably starve within the year, because EVERYTHING is risky in some fashion.

      Oh, let’s just outlaw high risk activities, right? Well, how do you measure risk? Answer: no one’s got a really fool-proof way of doing it, so you can’t, not in any across the board form you’d need for legislation.

      It’s pretty clear you’ve not thought this great plan of yours through.

    • Skaperen says:

      @Persistence: Futures markets are more than just gambling. One effect is that they smooth out the pricing bumps that companies pay for goods and materials. But more importantly, it lets them have a fixed price for some period of time in which they can do the planning.

      It’s not much different than having a contract with a specific supplier, other than they aren’t locked in to that one supplier’s ability to deliver. They can still buy from the supplier with the lowest price. But they did lose money on their bet in the future’s market for things that go down in price.

      When the prices go up more than they expected, their futures contract is a benefit to them. The question is whether they will pass that on to consumers then, like they are passing the losses on today.

      • the Persistent Sound of Sensationalism says:

        @Skaperen: Look. I understand the concept behind the stock markets, investment, futures, etc. Do you really believe that the mess we’re in now, the day trading people do, the “instant gratification” stock brokers have been getting, really has anything to do with investment? Buying shares in a stock based on whether it’s a good business and will sustain itself is investment. Buying shares in a company that looks good, will profit quickly, then fail, is gambling and manipulation. Alan Greenspan aided in the deregulation of the market in the hopes that these “business men” would do the right thing for the long term benefit of the economy and he did it at the urging of lobbyists and congressmen. It has backfired horribly. I understand the economy all too well. Money I was going to use from inheritance (which was in stocks) for school is on the verge of being delisted after being at a high of $49/share 18 months ago. This is from an old reliable company and I know it will recoop someday, however, what my grandfather still has and was relying on for retirement is gone, he is 92, it will not recover in time to help him. He was fine, now he is poor. Yeah I’m venting a little but it’s the gambling, the greed, even now it’s the fear mongoring that effects the price of stock, not the value of the company or it’s product, so eat my ass.

    • Tmoney02 says:

      @Persistence: Econ 101 – I think you need to take it.

  4. redskull says:

    Is that sign in the photo for real? What exactly are the ingredients in milk? Let’s see, there’s… milk, and um… hmm.

    • Trai_Dep says:

      @redskull: Melamine.

    • Homerjay (insert star here) says:

      @redskull: Lead.

    • ADismalScience says:

      @redskull:

      The ingredients in milk?

      Depreciation on a cow
      Housing and real estate costs for a cow
      Licensing costs
      Refining costs
      Certification and testing costs
      Transportation costs
      Utility costs for stocking
      Marketing and branding costs
      Forward contract costs
      Applicable financing costs for equipment/cashflow management

      Oh, yeah, and I guess grain.

      The point being is that your grocery store isn’t stocked by Ma and Pa’s farm, Dorothy.

    • WhatStockMarket?_GitEmSteveDave says:

      @redskull: And all the things you must feed the cows to get said milk. Like corn, which thanks to the ethanol debacle, shot up like crazy. Which reminds me, I have to watch “King of Corn”.

    • lincolnparadox says:

      @redskull: You’re terribly amusing, Mr. Shmidt. But I believe that they are referring to dairy products.

    • HogwartsAlum says:

      @redskull:

      They’re happy cows, and happy cows come from California, and of course it costs more money to live in California these days.

    • John Pauly III says:

      @redskull: It sure isnt going to the farmer. Dairy farmers right now are barely making enough to pay for feed

    • SynMonger says:

      @redskull: How can you put a price on the forgotten ingredient… Love! The dairy industry loves your money at any rate.

    • Bitmapped says:

      @redskull: The ingredient is butterfat, which is actually pretty expensive.

      Also, there is basically no profit for dairies in producing regular fluid milk. In a good year, you might earn a 1% or 2% return if you do everything right.

  5. Nettwerk says:

    You didn’t see this coming?

  6. cabjf says:

    Ah, speculation, is there anything you can’t screw up?

    Seriously though, I wonder if this is just going to hurt brand names further as I doubt store brands are seeing quite the same situation and were the better value to begin with. Why buy Kraft mac and cheese when the store brand is half the price, especially if you already hurting in this economy or are worried you may be in the future?

    • Raekwon says:

      @cabjf: When done right speculation can be a good thing. Southwest Airlines secured very cheap gas early on and it is paying off for them.

      • ADismalScience says:

        @Raekwon:

        Actually, it’s kicking their asses. Southwest has long been the most aggressive of fuel hedgers and they’re “paying” much more for fuel than it costs right now. Their results have been god-awful since oil collapsed.

    • Spider Jerusalem says:

      @cabjf: This is true. I just bought a 12-pack of generic for like $6 at a Food 4 Less. Kraft was on sale as well, but it came out to like 90 cents a box. Anyway, my husband has refused to have any Philip Morris products in the house since I showed him Consumerist’s list of stuff owned by said company.

    • t-r0y says:

      @cabjf: Speculation is an important component of our economy. But sometimes people and companies fail predict accurately.

    • Snarkysnake says:

      @cabjf:

      “Why buy Kraft mac and cheese when the store brand is half the price, especially if you already hurting in this economy or are worried you may be in the future?”

      Why indeed.In fact,you are not the only one asking such a perceptive question. Two major grocery chains (Food Lion and Safeway) have recently sent ultimatums to some of the biggest manufacturers of food and other consumer items that if they don’t REDUCE their prices,they (the supermarket chains) will pull their product off the shelves. Seems that the high prices are scaring customers away to Walmart,Costco etc.

      This sets up the possibility that the manufacturers (Proctor & Gamble,Unilever, Kraft etc.),have decided to “tax” or “punish” the consumers that do not price shop or seek value.

      Safeway was just point blank: We will begin pushing our store brands.Unilever told them to piss up a tree. So,the next great battle between sellers and buyers is under way. I hope we win.

    • CaptZ says:

      @cabjf:

      Alot of the store brands and off brands are made from the same company that makes the high and mighty big brands. Whats the excuse again?

      But then again, I have seen the store brands higher than the big brand names alot lately.

    • Framling says:

      @cabjf: Why buy Kraft mac and cheese when the store brand is half the price[...]?

      Because I often find store-brand that’s half the price is also one quarter the quality.

    • HogwartsAlum says:

      @cabjf:

      Because the store brand is groooooooss…

      I buy Annie’s Organic mac n cheese. It’s more expensive but it tastes much better.

      • doctor_cos wants you to remain calm says:

        @HogwartsAlum: Sometimes yes, sometimes no. I have come across several ‘store brand’ mac & cheeses that were as good if not BETTER than the high-priced blue box.

        Of course, when the blue box is on sale, we stock up :)

  7. Nighthawke says:

    Thank god I bought that 1/2 beef at the county fair before they jacked with the prices. Me and the family will have GOOD eatin’s for awhile before we need to get anything other than the bare essentials.

  8. frodolives35 says:

    I think they are also using this as an excuse to increase their profit margin. WO HO bad times heres our chance they wont blame US.

    • SadSam says:

      @frodolives35:
      I agree, I noticed that Papa John’s was still charging the $2.00 delivery fee that started when fuel prices when way up. So, I asked them before I ordered recently why they were still charging and they couldn’t explain it, so I didn’t order from them.

    • unpolloloco says:

      @frodolives35: If stock prices are any consideration of profitability, Kraft’s has gone down by almost half in the past year. That means that they’re struggling to keep profitability rather than expanding it.

    • dangermike says:

      @frodolives35: nope. wrong. You see, when you have to buy raw materials by the tons, and on a steady supply schedule, as is the case in most large-scale production and manufacturing situations, it’s not like you can go to the corner store and get the cheapest bag of flour. You tend to buy contracts for several months at a time from suppliers that have a proven record of delivering quality on time. the contracts are often quarterly, semi-annual, or annual, and their prices remain until the completion of the contract. Logically, we shouldn’t expect to see price reductions until several months after raw material prices slide, and in many cases, we’re still witnessing the aftermath of the price run-ups.

      A similar thing happened during last summer’s fuel crisis with several airlines purchasing huge lots of fuel so as to avoid further increases as the crisis deepened. But as fuel prices receded, their contracts remained.

  9. Lollerface says:

    We’ve become accustomed to the price hike so they have no reason to lower prices. Higher food costs aren’t getting the media coverage high gas did, so there’s no public outcry and no incentive to return prices to normal.

    • Raiders757 says:

      @Diminuendo:

      I think that’s a problem that has gone on for way too long with commodities. The price jacks up for a small reason, we get used to paying that price, the small reason goes back to normal, and the prices don’t come back down. This then adds to the cost of living, and so the slippery slope begins.

  10. LiC says:

    [sarcasm]Maybe the cost of what they feed the cows has gone up?[/sarcasm]

    • Stephen Snider says:

      @LiC: sarcasm tags NOT required. Unless you’re suggesting that they are sarcasm. Because the cost of feed HAS gone up.

  11. williamgarzon says:

    Seriously…how much harder do they have to make it on people. I’m starting to think they want us all bankrupt, i guess we should all go on government cheese…but then again we would still get shafted.

  12. rhys1882 says:

    From what I’ve heard, the cost of animal feed has gone up. But I have not confirmed that.

    • quiksilver says:

      @rhys1882: Yes, the cost of feed has gone up… about 4x amount. The largest cost increase has been corn, due to corn farmers making more money selling their crops for ethanol.

      Unfortunately, corn is one of the main foods that a majority of animals eat (dairy cows, beef, chickens, pigs).

  13. Saboth says:

    I’ve wondered this myself. Most of the prices going up were blamed on “increased cost of transportation”. Now transportation is cheap, and food prices keep going up, or packaging shrinking. My guess is people are buying less (except necessities), so they are jacking up the rates to try and make up the difference.

    • Spider Jerusalem says:

      @Saboth: No, cow products and grain products were blamed (though largely ignored) on the fact that a lot of farmers sacrificed their corn crops to ethanol speculation. That PLUS the gas hike just screwed the food supply, and those farmers who chose to back ethanol.

  14. AcceleratedDragon says:

    My Electric utility is doing the exact same thing.
    Last year when commodity prices where going through the roof. “The cost of coal is causing us to lose $20 million a year. We need to raise rates to cover our losses.”
    The price of coal (like all other commodities) has since returned to “normal”. But our rates have stayed at the new adjusted levels.

  15. JohnDeere says:

    kick em when they are down

    or

    lie, cheat and steal.

    take your pick they are both the “American Way”

  16. vastrightwing says:

    A: because they can. The same reason text messaging costs .20/message. There is .00/message cost yet you pay .20/message because you pay it. The price will go down when people stop paying. Yes, it is that simple.

  17. thecreative says:

    I personally think it’s ethanol. If I’m a farmer growing corn why wouldn’t I sell it to be turned into ethanol rather then raise it to be quality food for humans or cows.

    I haven’t purchased a drop of fuel with ethanol in it for a while. Here in Oklahoma many residents have refused also and so many stations are being forced to go back to 100% gas, not the 90/10 stuff.

    Not only is this stuff rasing food prices but it’s also bad for our cars. Worse MPG and will wear down your engine faster.

    Stop buying ethanol and you will see food prices finally come down.

    • shepd says:

      @thecreative:

      That’s fine with me! Those of us in colder areas *need* ethanol in the fuel so we don’t have to buy gas line antifreeze. :) More for us!

    • David Brodbeck says:

      @thecreative: Corn is actually bad for the health of cows, which is one of the reasons we have to give them so many antibiotics. The only reason they’re fed it is (a) it causes them to gain weight faster, and (b) government subsidies have, historically, made corn a bargain compared to other feed grains.

      • MrEvil says:

        @David Brodbeck: The cows are only eating those processed feeds for their short time at a feedyard before slaughter. Up to that point they’ve been mainly consuming ground cover be it grass or wheat pasture.

    • MrEvil says:

      @thecreative: You do realize that farmers have VERY little say where their grain goes once harvested? Most farmers deal with a grain company or grain co-op who then resells the grain on the open commodities market. VERY few farmers have contracts with end users such as Frito Lay or Cargill. My dad and I Have been fortunate that on our last couple wheat harvests the local flower mills have had increases in production and the grain they bought on contract didn’t cover their demand, so we have been able to haul our wheat straight from the field to their silos.

    • quiksilver says:

      @David Brodbeck: No, actually that’s incorrect. Being raised on a farm and having taken animal science classes, corn is a necessary food for dairy cows, as well as other animals.

      @thecreative: Exactly. The increase in ethanol fuel has increased corn prices around 4x than previously. Unfortunately here in Oregon, we don’t get a choice to have 100% gas, we get stuck with the 90/10 ethanol blend. It would be nice for the government to stop pushing/financially supporting high ethanol fuel blends. This might lower the prices some.

    • Primrose says:

      @quiksilver: Corn isn’t actually a required foodstuff for cattle. It packs a lot of energy, which makes it a very attractive option. However, too much corn can severely disrupt the animal’s GI tract (which originally evolved to eat grasses and hay). While a properly balanced diet can include some corn, no farmer would ever feed a corn-only diet to dairy cows (unless he wanted to watch them all die).

  18. kwsventures says:

    Understand prices will be much higher in the future. Reason: massive government debt will drive up interest rates to sell our bonds, creating hyperinflation. You can’t flood the world with dollars and expect any other outcome. With that, you can thank everyone in congress that has approved of this bailout (i.e, save the losers) mentality. It has never worked.

    • t-r0y says:

      @kwsventures: So true, so true. But to elaborate on your statement…

      You can’t flood the world with dollars and expect any other outcome.

      …that should be “dollars AND credit“. The government doesn’t actually have to print the money to cause inflation.

  19. econobiker says:

    Sticky prices?

  20. ADismalScience says:

    Futures contracts were actually formally invented by Samurai in Japan to hedge rice prices. They’ve existed as long as the harvest, though. The concept is that you lock in a value on a planted crops to plan your expenses and stabilize commodity-for-coin relationships.

    Volatility in the commodities marketplace does wacky things to pricing. Ultimately, though, the relative price stability at the grocery store is provided by the liquidity and speculation surrounding it. Were futures and forwards not employed, prices would change both rapidly and drastically.

  21. 67alecto says:

    The minute they raised the prices, it became a line-item on their 2009 budget and revenue plan. To lower the price would require that they don’t meet their financial goals.

    • catnapped says:

      @67alecto: I think for every article I’ve seen written on the subject of “why aren’t prices coming down”, your excuse sounds almost spot-on. Those fuel surcharges got absorbed into “operating costs” and reducing or removing them isn’t possible from the company’s standpoint lest they anger the stockholders.

  22. shepd says:

    Manufacturers blame the price increases on futures contracts they unwisely bought, and now they’re paying too much for cheapened ingredients. Bad speculation strikes again!

    Sounds like it’s the perfect time for a new company to start eating these stupid companies alive. A new one that doesn’t have futures contracts.

  23. Lin-Z [linguist on duty] says:

    It seems like practically everything at my grocery store has been at ridiculous sale prices, not rising. They had roasts for buy one get one free and a dozen eggs were $.99. Sounds like it’s going down in my neighborhood.

  24. Spider Jerusalem says:

    I don’t buy it. Why wouldn’t Kraft have secured a foodchain for itself when the economy started to go bad? Why NOT spend some of those billions to buy farms so you can control your supply costs? If Philip Morris really wanted the goodwill of the people, they would have bought farmland or struggling working farms and dairies for stuff other than tobacco farming.

    • Bitmapped says:

      @SpiderJerusalem: There’s a concept known as core competency. Kraft and the other companies don’t know how to run dairy farms and they don’t want to – it’s much simpler (and sometimes cheaper) to just buy the product on the open market.

  25. ElizabethD says:

    This is reminding me all too much of the various “reasons” why gas prices keep fluctuating at the pumps — and not in a good way. :-( I can’t help but think that we (consumers) are being played, guys.

  26. Ihaveasmartpuppy says:

    Oh come on, that is a stupid sign. Why not say “NOTICE TO OUR CUSTOMERS: Milk prices have increased due to rising costs”?

  27. AnonymousFinger says:

    “Manufacturers blame the price increases on futures contracts they unwisely bought”

    Trading in futures should be outlawed!

    It’s why gas went over $4 a gallon and causes more problems for the consumers than its benefits.

  28. Spaceboy says:

    @redskull:

    I’m with you. While you certainly could say they are ingredients in milk, it was a poor choice of a word.

    For example, when I look at a recipe for baking a cake, it doesn’t list my working to gain income to buy the other items needed and driving to and from the store as an ingredient for the cake.

    So I wouldn’t describe the logistical costs of producing milk as being “ingredients”.

    • ADismalScience says:

      @Spaceboy:

      Point taken. I am just busting your balls, after all. But in a large sense, those cost elements are the “ingredients” in the pricing structure of milk. The sign is the simple explanation – “Oh, what they feed the cows costs more.” The reality is that all kinds of cost-structure elements are putting pressure on prices.

      For example, the fees and expenses associated with financing operations at this company have spiked. Commercial paper and related instruments, mainstay cashflow management tools, have gotten pretty pricey. It just goes to show how deep the rabbit hole goes with the banking system.

    • floraposte says:

      @Spaceboy: However, the packaging does need to be included, unless you’re filling up your own gallon jug at Bossy’s pump.

  29. darkryd says:

    Uhh – isn’t it obvious?

    Food companies are hiking prices to make more money to hedge their bets since things are only going to get worse economically.

    Supply+Demand=FAIL.

  30. Outrun1986 says:

    It seems to be a problem here of the grocery store lowering the price of certain items, but them also raising prices of another item. They have to raise the prices on other items to make up for the items they put on sale. When the items that are on sale go off sale, then their price goes up even more as well than what the item cost even before it went on sale. I feel like the grocery stores are just trying to jerk me around, and unfortunately I have eat so I have to shop at them.

  31. P_Smith says:

    “Manufacturers blame the price increases on futures contracts they unwisely bought, and now they’re paying too much for cheapened ingredients.”

    That excuse smells fetid and fecal.

    If it were the case that contracts signed after oil went up, then why did prices rise immediately on products already in stock and on shelves?

    Then were price gouging before or they’re doing it now. More likely, it’s both.

    • David Brodbeck says:

      @P_Smith: It’s not necessarily foul play. They have to price their product at what it will cost to replace it.

      To simplify, let’s say you run Bob’s Donut, so called because you bake one enormous donut each day and sell it. Let’s say it costs you $10 to buy the ingredients each day to make your donut, and you sell it for $15. But today you find out that prices have skyrocketed and it’s going to cost you $20 to bake tomorrow’s donut. If you sell today’s donut for $15, you’ll be $5 in the hole when you try to buy tomorrow’s ingredients.

  32. catnapped says:

    It’s even worse…it seems some manufacturers are discontinuing lower priced SKUs, changing the packaging on the item (“NEW and IMPROVED”), and jacking the price up on the “new” product (which is likely the same as the old one aside from the box). I’ve seen it in TV dinners, as well as the Pringles cans just today alone.

    Going back to that story awhile back about bags of Doritos getting larger (as opposed to the usual shrink-ray), I’d be willing to bet they’re going to offer the new larger size at a promotional price (same as the old one) but jack it sky high within a few months.

  33. rockasocky says:

    PINEAPPLES, WHOOOOOO!!!

  34. edebaby says:

    The Federal Reserve, creating all that money and credit in the banks – so that somebody could borrow all that new money and use it to buy such mountains of public and private debt – is stupid-beyond-madness, and now we are all freaking doomed because all the world’s money is going to crap as, suddenly – as part of a coordinated, global economic stimulus – whole mountains of money and credit are being created so that governments can try to spend their way out of bankruptcy!

  35. Subsound says:

    It makes sense as what is being sent out to market now took a good long time to grow, harvest, and process. Add in the futures contracts and the price is higher then it should be. Of course prices are going to be sticky coming down too, with companies wanting to keep the profits in the difference between the new lower prices and the old high ones.

  36. michaelgibbons says:

    The issue with food right now is not inflation and the resulting commodity spikes. It’s not speculation, either. It’s the securities market. When you hear people say, “The credit markets are frozen!” this doesn’t necessarily mean you can’t get a retail loan. What is frozen is the securities market. So farmers are having a hard time receiving loans to buy their most expensive overhead expenses—nitrogen and other fertilizers. In normal times, they get these loans much more easily and then the loans are securitized. However that’s not happening as much right now.

    Though inflation isn’t being reflected in prices now, we have increased M2 and M3 at obscene rates and this will eventually raise prices. Historically food prices are always the first to spike.

  37. ceez says:

    they now want to be like the greedy wallstreet ceo’s! they got a taste of that xtra money and now that the prices have dropped they want to continue pocketing that cash while stabbing the american consumer in the wallet.

    welcome to the united states of greed!….unfortunately :(

  38. Anonymous says:

    Maybe Obama should do like Hugo Shavez did with the rice producers in Venezuala. He sent in the military and threatened to shoot them if they didn’t drop their price. Of course, they dropped their price. But then they realized they could sell their product for a better profit in other countries. Now Venezualans have rice shortages and long food lines. Get ready, Obama socialism is on its way along with shortages and lines.

  39. Joe Lachiana says:

    Businesses need to recover from years of hard losses before you start to see any savings from lower manufacturer costs.

    Right now everything is in limbo. Maybe by next year if the gas stays put we’ll start to see inflation back off a bit but for now forgetaboutit.

  40. Anonymous says:

    “Consumers value our new price point. Decreasing it might be perceived as lowering our quality– and that is not the message we wish to send.” Mr Greg Reed says “We may use more coupons to encourage our price conscious consumers to feel as though they are getting a better value.”

    /s

  41. Tiber says:

    Just once I’d like to see some hard proof to back up these claims. So show us some expense sheets, then and now. If need be, it’d be pretty easy to find a financial expert who’d be willing to run the numbers for a modest fee, especially considering how many people could use a little extra cash these days.

  42. Anonymous says:

    Prices only goes up.
    It was the same joke when our Canadian dollar reached par with the U.S. We still paid prices as our Canadian dollar value was 0.60$ U.S. And they said the same thing “future contract”, and that it would eventually adjust… well it never did.. not even after 6 month. Now it’s bellow, and instead of having the same price… prices still increase and companies says it’s because our currency value lowered. So when it lowers we get direct live hit on the products including food, but when it should come down, it takes several years.

    Makes sense to me!

  43. Anonymous says:

    I have a friend whose family has, for many generations, owned a large commercial bakery. They operate in several states and supply grocery stores, Target, etc. He told me that they have kept prices high because people paid the higher prices a few months ago! In other words, they legitimately (or not, depending on how you see it) raised prices when the price of gas, wheat, flour, whatever, went up. And the stores and, in turn, consumers, paid the higher price. When prices started going down, they said, “Hey, people showed us that they’ll buy the product at a higher price…so let’s just stick with that higher price!”

  44. MrBlahBlah says:

    There is a lag between when the input costs go up and when they can raise prices….so there is probbaly a lag on the way down. but seriously, do you really think they will revise down? i doubt it!

  45. ageshin says:

    The prices of commodities are largely driven by greed, and governed by what the market will bear. Since our problem is deflation and not inflation, these greedy companies are highlighted even more than usual. Remember that prices are not set by market forces, just by human greed.

  46. Anonymous says:

    It’s basic agricultural economics. Food prices always lag behind the prices of raw goods. Grain prices were really high, then it takes a while for it to be fed to cattle and turned into dairy/meat. Producers pass on their cost to the consumer, even if it is months later. Even chicken takes a month or two before it’s ready to go. Ethanol’s not really the problem now, that’s why grain prices are low again, but (processed) food still has to catch up.

  47. m-p{3} says:

    I’d say because of market speculation, like how any market that could be affected by the economy.

  48. grumpymo says:

    Why are staples like dairy, eggs, meat going up?

    Many farmers plowed hayfields and put in corn.
    Feed corn that was targeted to animals is now set for ethanol production.

    Costs for hay in most areas across the US have doubled or tripled, almost all larger animals make up most of their daily diet on good quality hays, which are scarce, especially since some hay areas had bad years, so people don’t have as much hay as they need right now for herds, which if you have dairy cows means that you take them out of production.

    State taxes on your land and farm buildings are going through the roof. All the taxes and fees to keep your farm inspected and compliant with every fed reg for food production are going up.

    Diesel prices are still very high, so there isn’t the cost savings to run your farm machinery.

    Most farmers alone are barely clearing expenses to keep the business running, and that is at nearly every level.

    Then you start tacking on all the costs for the people who are recieving your milk and turning it into all those tasty dairy products. They have all their expenses, which even if they have stayed the same, some will have gone up, then take the company level and whatever your profit taking is.

    Basically it all comes back to the price of corn and the scarcity of hay, add in that in spring is the time when you’re running out of hay and grain you stockpiled last fall and possibly searching for more to get you through the next couple months till you can start getting new cuttings. The feed guys can ask for whatever they want right now for a quality you wouldn’t pay quite such good money for. Especially since winter has been very hard up in the Northern Midwest, you’ve had to feed more all winter, if you still have enough hay to make it through the current very cold temps you are pretty savvy.

    So there you go that’s why a lot of your prices for staples are up, and just wait till we see the dip in wheat supply from the farmers who put in corn in the central midwest instead of wheat.

  49. esc27 says:

    I know that fertilizer prices at least are getting very, very expensive. I’m not sure if that would directly affect milk prices, but other food prices will likely have to go up for farms to survive…

  50. Southern says:

    Milk prices have actually been dropping in my neck of the woods (Houston), I see it quite frequently now for $2.99 a gallon.

    Other food prices though (especially fruits) have gone up considerably, although vegetable prices in general appear to have dropped a bit