Why I Expect 10% Food Price Inflation

This is a guest post from Gary Foreman, a former purchasing manager who currently edits The Dollar Stretcher website. This article originally appeared here. You can follow Gary on Twitter.

As a country, we spend an unusually low percentage of our income on food–roughly 10 percent by many accounts. As food prices spike on one end and the sustainable movement pushes us to “greener” and more expensive foods, it will be interesting to see how all of that affects our spending habits. Here are Gary’s thoughts:

Anyone who has been to the grocery store recently knows that food prices are going up. And, our expectation is that this will continue. Recent news reports provided evidence to support that fact.

In an article from Reuters on ConAgra’s quarterly earnings,

“ConAgra said in June that profit growth for the current fiscal year would be below its long-term goal of 6 to 8 percent, due mostly to higher costs for everything from meat to packaging.

It warned at the time that first-quarter profit would be lower than a year earlier as price increases have not kept pace with accelerating inflation.

On Tuesday, the company said it expected commodity costs to rise 9 to 10 percent in its consumer foods segment this year, up from its previous forecast of a 7 to 8 percent increase.”

On the ConAgra website’s ‘about us’ page they describe their business this way:

“Our consumer foods are found in 97 percent of America’s households, and 25 of them are ranked first or second in their category.”

Why is that important? Because ConAgra is involved in food at all levels. If any company would be impacted by higher food prices it would be ConAgra. So it’s reasonable to assume that they have some of the best people looking at any scrap of information that could help them predict future prices. So when they say they expect 9 to 10% increase on their raw materials we’d be foolish to doubt their word. And, unless we assume that they’re dumb, we’d have to expect that they’ll raise their prices by a similar amount to protect their profit margins. That means 9 or 10% higher prices at the grocery store for you and I.

So what’s a poor consumer to do? Fortunately your hands are not tied. There are things that you can do besides watch your grocery bills increase each month for the next year. Let’s look at some tools you have at your disposal:

• Buy non-perishables ahead. If you don’t already have a pantry, now is the time to start one. If you know that you use something regularly and it has a reasonable shelf-life, why not stock up now? Having a 3 to 6 month supply of canned goods is a good idea. Look for sales and coupons to build up your supply.
• Plant a garden. You may not have a green thumb. I don’t. But just about anyone can plant a few things that they like and manage to grow them to maturity. If you’re unsure about how to start, ask a friend/co-worker who does garden for advice. Or visit the gardening section of the The Dollar Stretcher library.
• Learn to can fruits and veggies. Except in rural areas, canning has largely become a lost art. It’s time to find it again. Most fruits and veggies are less expensive when they’re ‘in season’ locally. In some cases, they’re very cheap. Everyone knows that you want to stock up when something is cheap. Home canning allows you to do that.
• Reduce the amount of meat in your diet and recipes. Meat is expensive. And, unless the price of corn and other animal feed goes down (which is highly unlikely), we can expect it to increase as much, if not more, than other food items. So now is a good time to find ways to reduce the amount of meat in recipes. Instead of one pound, try 3/4 pound. And, even if you’ve never considered a vegetarian lifestyle, now might be a good time to find a meatless recipe or two to add to your mix of regular meals.
• Learn to cook cheaper cuts of meat. A good cook can make wonderful meals from less expensive cuts of meat. Spend some time in forums asking questions and learning from more experienced cooks.
• Use a slow cooker. Not only will it help make cheaper cuts of meat more tender, it will also make it easier to have a warm meal waiting for you when you get home from work. That’s a twofer tool in my book.
• Make the grocery store work harder for you. When roasts are cheaper than ground meat, but the roast and ask the butcher to grind it for you. Or buy the roast, cook it and slice part of it for lunch meat. Nothing says that lunch meat has to come from the deli counter.
• Shop in unusual places – like bakery outlet stores and immigrant groceries. Outlet stores aren’t just for cheaper clothing. A quick stop at a bakery outlet store can provide savings in a variety of ways. Immigrant grocery stores can be a real eye-opener. Many immigrants have limited income. So they know how to feed a family for less. Not only will you save money, you’ll also discover new tastes that will seem like an adventure for your family.
• Learn to use leftovers. By some estimations, most families waste about 20% of the food that they buy. Much of that is from leftovers that go bad in the back of your fridge. A little planning can help you use those leftovers before they go bad and turn them into convenient dinner items or inexpensive lunches.

Most of us are in a battle to keep our expenses in line with our income. Overcoming a 10% increase in the cost of food will not be easy. But at least you’re not helpless. There are steps that you can take to minimize or even reverse the damage.

Wojo’s note: We’re always trying to cut down our grocery budget, one of the largest and most variable budget categories we have. How is your family dealing with the recent price increases and getting ready for the ones down the road?