Taking a hit in the gut

As food prices rise, shoppers change their buying habits: Chicken every night for dinner

Milk is $4 a gallon.

Cereal is $4 a box.

And an orange for your lunchbox can run $1.50 or more.

Food prices are rising faster than they have in 17 years, and there's no relief in sight. Economists had expected a 4 percent increase this year -- we reached that in May.

No one is predicting prices that will make you hit the panic button. But when you add the higher grocery bill to everything else that costs more -- gas, utilities and medical care -- it's an unwelcome change for most families.

To compensate, many consumers are making changes: buying more generic products, switching to cheaper meats or simply cutting out some of the extras they normally buy.

Shopping smart

Wake Forest resident Margie Kishpaugh is caring for her three children and three others she is watching for friends this summer. The six children go through a gallon of milk a day.

Kishpaugh has found ways to stretch her already-tight budget. She uses coupons, buys items on sale and stocks up on products when they are cheap.

"The last time it was on sale at Lowes [Foods], I must have bought at least 20 packages of chicken breasts," she said. "We eat chicken almost every day."

Chicken prices have risen, too, along with prices on everything from eggs to steaks.

Several factors are boosting costs. Blame bad weather in Florida for higher produce prices and blame higher oil and gas prices for just about everything else.

It takes energy to get food to the table, from fertilizing it to harvesting, packaging and transporting it. Manufacturers are passing those increases on to consumers.

Higher oil prices have had another consequence: There's a national push to boost production of ethanol, which is made from corn, as an alternative fuel. That in turn has increased the demand for corn and led to higher prices. The price of a bushel of corn nearly doubled -- to $4 -- from late 2005 to early 2007. Those increases have hit farmers who use corn as feed, cereal manufacturers and even soda makers (corn syrup is used as a sweetener).

There could be some relief on that front, at least. At the end of June, the U.S. Department of Agriculture reported that the nation's farmers dedicated more acres than expected to growing corn -- something that will help alleviate some of the pressure on the corn market.

However, that announcement had a negative side: More acres for corn means fewer acres of soybeans, wheat and other crops.

If that's too big-picture for you, just take a look at the price of a box of cereal.

At first, manufacturers and retailers seemed to be absorbing the higher cost of corn and gas, but they were really just working through their inventory of already-made product, said Brian Todd, president of the Food Institute, a New Jersey group that studies food prices.

Cereal "has a longer shelf life, so it takes longer to filter through," he said.

Now a box of cereal can easily cost $4.

At the end of June, cereal maker General Mills debuted new boxes for Cheerios, Chex and Wheaties. The prices are slightly lower, but the boxes shrank and the price per ounce went higher. General Mills spokeswoman Kirstie Foster would not say specifically how much the prices increased, saying only that the percentage increase per ounce was "a low single-digit increase."

Foster said the company is responding to market conditions and competitors. "Most of our competitors have already increased prices," she said.

A little perspective

Such changes might seem abrupt because so many products are affected. But historically it's not that bad, Todd said.