Sticker Shock: Gas Prices Are Driving High Grocery Bills

By Kym Klass, Montgomery Advertiser, Ala.

Apr. 30–If you want a good indication of what your grocery bill is going to be next month, look at the gas pump today. And check the weather report. And keep an eye on the value of the dollar.

Higher energy costs are wreaking havoc at the supermarket, local and state economic experts say.

The price per gallon has grabbed the headlines, though, maddening motorists who are paying $3.53 for unleaded when the price was $3.20 last month and $2.84 a year ago. With much less fanfare, the family food bill has been creeping up, too.

In Alabama, food prices are up on average about 5 percent from a year ago, according to the American Farm Bureau Federation. Bread, the staff of life, jumped a whopping 160 percent year over year.

“To see prices drop back down … I don’t know that anybody knows we’ll drop back to three or four years ago,” said Jim Sartwelle, an economist with the farm federation.

At a news conference Tuesday, President Bush called Americans “understandably anxious” about pocketbook issues — gas, food, mortgage and college tuition — but gave them little hope of any real relief soon.

“They’re looking to their elected leaders in Congress for action,” he said. “Unfortunately, on many of these issues all they’re getting is delay.”

The president pointed out his proposals for lowering gas prices — making it easier to build refineries and open the Arctic National Wildlife Refuge for drilling — have been repeatedly blocked by lawmakers.

Bush told reporters that he is open to suspending gas and diesel taxes this summer, an idea backed by two presidential candidates — Hillary Clinton, a Democrat, and Republican John McCain.

The president made no mention, however, of whether families can expect any relief in the grocery checkout line. In Alabama, a bill to eliminate the state sales tax on groceries sailed through the House but is still mired in the bitterly partisan Senate and would have to ultimately be passed by voters.

Even without tax relief, the state’s assistant agricultural commissioner predicts food costs will fall — but not to where they were.

“Gas is a finite resource, so unless we can come up with something to replace fuel, I don’t know that they can return to what they were before,” he said.

Many consumers don’t realize all the ways that gas and food prices are linked, state assistant agriculture commissioner Doug Rigney said.

There are the obvious reasons — running the combine on the farm and hauling crops to market.

“The cost of diesel has about doubled in the past year,” he said.

Then, there are reasons that wouldn’t dawn on lots of shoppers: Corn and soybeans used for alternative fuels or to feed livestock means less for humans — and a smaller supply in the face of a bigger demands means higher prices.

Finally, Rigney said, throw in the cost of fertilizers and herbicides, which have skyrocketed in the past year.

Ammonium nitrate, for example, is used in growing everything from corn to cotton — and comes from natural gas.

“And you know what has happened to the price of natural gas,” Rigney said.

Making the matter even worse is that farmers are choosing to grow soybeans and peanuts, which don’t need as much or any fertilizer. Fewer fields of corn mean a smaller supply to meet demand — and those higher prices.

Agricultural economist Robert Nelson is interested less in the reasons for the short supplies than why the world agriculture economy isn’t responding faster to the rising prices.

When prices are so high, Nelson thinks it stands to reason that farmers would be growing corn and storing it.

“But there is a lag … when prices go up, people start thinking of planting at high prices, but it takes a while to grow,” he said.

“People want things to happen faster than what is capable of happening,” said Nelson, who teaches at Auburn University. “With the gas prices so high, it should mean more gas coming in, but it takes time — but it’s not fast enough for those buying gas.”

Observed Sartwelle, the farm federation economist: “If you go back in the last 15 years, the lowest food price we had was the year when we had the highest stocks of food grains around the world.”

Bob Goodman, a colleague of Nelson’s at Auburn, believes the way to bring down the high cost of grain is to produce more of it — another 30 million or 40 million acres.

Goodman attributes the higher prices in part to a change in federal agriculture policy.

For a half-century after World War II, farmers received subsidies for not planting crops. A new farm bill passed by Congress in 1995, however, eliminated subsidies and allowed farmers to plant all their fields.

The farmers had to find more markets for their bounty. They exported more and turned to feed and biofuel manufacturers.

“What’s happened is, we no longer have chronic surpluses in the commodity because of the acreage shift and the increased world demand, including, but not limited to, demand for biofuel,” Goodman said. “All of these things have worked to increase the price increase people are seeing.”

Unless the farm policy changes — and Goodman expects it won’t — Americans need to get used to spending more for food.

Rigney even goes so far as to say consumers need to realize they’re lucky that food prices aren’t much, much higher.

“If you look at what we pay in this country for food compared to other countries, food is still available at a relatively cheap price here, and we have the most wholesome and healthy food of any place in the world,” he said.

Advertiser editor Rick Harmon contributed to this report.

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