'Marketplace' Report: The Cost of Breakfast

The government has raised its projections for how much the price of food will go up. Next year the average breakfast could cost ten percent more. We examine why.

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ALEX CHADWICK, host:

From NPR News, it's Day to Day. Eating is getting more expensive. The Agriculture Department now says food prices will go up by as much as another five and a half percent this year, and they already are up five percent over last year. Marketplace's Janet Babin is here. Janet, what do these food costs add up to in real money?

JANET BABIN: Well, Alex, to figure this out, I called up Ephraim Leibtag over at the Economic Research Service, part of the USDA. And we sort of pretended that we were going to make breakfast for four of our friends at his house. So I would make eight eggs with a half a pound of toast, and use about a half a pound of butter, and he was going to make a pound of bacon for all of us.

And here's the prices we were working with. Eggs right now cost about $2.07, on average. And last year they only cost a $1.62. They're up a whopping 28 percent. And those are not cage-free, by the way. Butter is up 10 percent over last year. Whole wheat bread is up 17 percent. And bacon was the least changed, 3.55 a pound this year, not too bad. So we tallied it all up, and here is Ephraim with the overall cost of our little breakfast party.

Mr. EPHRAIM LEIBTAG (Economist, USDA's Economic Research Service): I got $6.82 cents last year and $7.48 cents now, and so up 10 - that's what I was going to guess - 9.6 percent. So 9.6, almost 10 percent, higher for that breakfast now versus a year ago.

BABIN: And Alex, that does not, by the way, include what many consider the most important part of breakfast, the coffee.

CHADWICK: Well, what's causing the price increases?

BABIN: Well, as we've been hearing, you know, higher - and we know, higher energy costs and feed costs. The ethanol explosion's taking corn away from feed use, and retailers are passing all these costs on to us. But Mike Helmar, with moodyseconomy.com, says there's more going on here.

Mr. MICHAEL HELMAR (Director of Industry Economics, Moody's Economy.com): Crop problems around the world. There's high demand for other commodities that aren't fuel related. And there's also a very strong global economy.

CHADWICK: What do they mean, crop problems around the world?

BABIN: Yeah. Helmar used wheat as an example to explain this to me. Wheat crops around the world, he said, haven't been meeting demand for several years. So there's no extra wheat lying around, and that really pushes prices up because there's not a grain to spare. It's sort of classic supply and demand.

CHADWICK: So are there any food bargains out there? Bacon?

(Soundbite of laughter)

BABIN: Bacon is one. And then milk prices are actually starting to fall, Alex. They're still higher than they were a year ago, but they're lower than they were a few months ago. And also, believe it or not, eating out may be a bargain.

The cost of food away from home is projected to go up this year, but it's expected to go up less than the cost of food you buy at the grocery store. But really, you know, this is the biggest increase in food prices that economists have seen since 1990. And no one's expecting these prices to ease for quite a few years. So maybe we should all get those summer gardens growing.

CHADWICK: Good idea. Thank you, Janet. Janet Babin of Public Radio's daily business show Marketplace.

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Correction May 22, 2008

A prior version of the text mistated the cost increase.

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