Inflation is the untold story of the economic downturn. While unemployment, foreclosures and government debt make plenty of headlines, it’s startling to consider the slow and steady ascent of consumer staples. Inflation is driving up everything, from beef to soft drinks to grains to milk.
There are ways to hedge your investment portfolio against inflation, such as the best inflation investments I highlighted recently in a separate column. But there is little you can do to cut back the grocery bill as foodstuffs continue their never-ending march higher.
Haven’t noticed how bad inflation has gotten at the supermarket? Well here are nine ugly instances showing how much damage inflation is inflicting on family budgets:
1. The U.S. Labor Department reported recently that consumer prices were up 0.4% in August. That’s a 3.8% rate for the full year and the hottest pace of inflation since November 2008.
2. J.M. Smucker Co. (NYSE:SJM) announced it will hike Jif peanut butter prices 30% starting in November thanks to a weak peanut crop. That will really stick in the craw of soccer moms.
3. In New York City, ground chuck prices are up 18% this year to $3.99 a pound, according to the New York Post. As a result, “the price of the lowly hamburger is expected to surge by as much as 32 percent over the next several months.” Think things are better outside Manhattan? Nationwide, the USDA estimates beef prices will be up 8% to 9% in 2011.
4. Lest you think beef is alone in the rising price category, pork prices also are inflating briskly — 7.5% above levels seen last August. The phenomenon actually has pushed up pork prices so much so that pig theft is more common in the Midwest. Watch out, Wilbur.
5. The USDA also raised its inflation forecast for eggs recently, from a 5% rise in price this year to a 6% rise in price. Not a good sign, considering eggs are one of the most affordable sources of protein in the supermarket.
6. Solae, a joint venture between chemical powerhouse DuPont (NYSE:DD) and agribusiness giant Bunge (NYSE:BG), develops soy-based foods and nutrition products. Inflation in soy prices have resulted in an 8% price hike for Solae’s products, ranging from snacks to supplements to infant formula. It’s the second time Solae has raised prices this year. The company has tried to spin it by saying “extraordinary global demand” for soy products is behind the rise in prices and that soy prices aren’t rising as fast as beef, but that’s not much of a consolation to shoppers even if it is clever marketing.
7. Coca-Cola (NYSE:KO) has made a shrewd move this month, announcing it will sell a 12.5-ounce bottle of Coke for 89 cents. That product launch, under the guise of smaller portion sizes, allows Coca-Cola to raise the price on its 16-ounce bottle to about $1.19 over the next few months and prop up profit margins.
8. Despite the fact that milk output in August was up more than 2% from a year ago, the USDA reports that this year’s average milk price is expected to set a record $20.40 per hundredweight — up more than $4 from last year for a roughly 25% jump in milk prices.
9. In 2011, the USDA projects the price index for “all food” will increase 3% to 4%. That breaks down with “Food-at-home (grocery store) prices are forecast to rise 3.5% to 4.5%, while food-away-from-home (restaurant) prices are forecast to increase 3% to 4%.” On top of that, 2012 projections predict another food-at-home price increase of 3% to 4%.
Jeff Reeves is the editor of InvestorPlace.com. As of this writing, he owned none of the aforementioned stocks. Write him at [email protected], follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook.