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Food prices continuing to climb

Wednesday - 2/26/2014, 5:25am  ET

Rising food prices

Matt Heimer, Marketwatch.com

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WASHINGTON -- If it seems like food prices are going through the roof, you're not imagining it. And they're going to keep going up.

That's what Matt Heimer, editor of the Encore blog at Marketwatch.com, predicts, and while there are several explanations, he says the biggest factor is weather.

Beef prices have gone up about 10 percent for steak and about 15 percent for hamburger this year, and dry conditions have been a major contribution, Heimer says: Drought has been "thinning out a lot of the big cattle herds, and fewer cows on the market means higher prices."

Vegetables affected by the drought as well, particularly the crippling one in California, Heimer says. The effects will take about six to eight months to show up, he adds.

For example, bread prices have risen because there was a rough winter last year in the northern Plains states, such as Nebraska, from where red winter wheat comes.

Pork is more expensive. It already costs about twice what it did five years ago, Heimer says, but for different reasons.

"You can probably blame the bacon fad, among other things," he says, but hogs also have fallen victim to a virus this year - "again, that means fewer animals, so, higher prices at the supermarket."

And while American milk consumption is down, milk and cheese prices are up about 10 percent this year. Heimer says the rest of the world is catching up, especially in China, which is not culturally a big milk-drinking part of the world, so even though American consumption is down, demand is growing, and driving up prices.

Nuts haven't been affected as much by weather as by their improved reputation as a heart-healthy snack, Heimer says. Salmon prices are on the rise for a similar reason.

"As the food's reputation for healthiness gets better, you've got many more consumers trying to buy it." The price of salmon feed is going up as well, Heimer says.

High food prices have an effect all through the economy, Heimer says.

"It's a serious issue, because if you're spending more on groceries, you've got less money in your budget for other things; that can certainly ripple through the economy."

Restaurant owners, he adds, face the grim choice of taking less profit or raising prices and possibly driving customers away.

"It kind of all serves as a reminder of how much weather, especially, can really affect our lives in ways that we might not notice right away."

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