Consumers eating higher food costs

The average price of milk is up about 21% in the last year, and orange juice is squeezing budgets about 31% more than it was in July 2006.

When gas prices soar, people often drive less. But when the cost of grocery-store staples sets records, as they are now, few families are willing to do without.

"Food prices fluctuate a lot, so people don't factor it into budgeting decisions," says Ellen Davis, spokeswoman for the National Retail Federation, which represents many grocery stores.

A variety of factors are contributing to higher prices for bread, cereal, cheese and other shopping-cart basics, says agricultural economist Tom Jackson of the economic consulting firm Global Insight.

As the standard of living rises in countries such as China and India, more of our food goes there, which puts pressure on prices.

Meanwhile, demand for ethanol is raising the price of corn. That boosts prices for milk, chicken and beef, because corn is used for feed. The higher price of milk affects the price of cheese, and that, in turn, raises the prices of processed foods with cheese in them.

So what's a budget-minded shopper to do?

Larry James of San Mateo, Calif., who used to buy 2 gallons of milk for $3.59 and now pays $6.29, says he has few choices.

"What can I do about it? Picket the grocery store?" James asks. "About the only thing I have a little control over is how quick or slow I use up the $3-a-gallon gasoline I purchase."

That's one of the reasons high prices, such as for milk, aren't budging, says Jackson. "You're going to buy milk if you have kids," he says. "If people don't stop buying, prices are going to keep going up and up."

Still, people are looking for ways to keep their food budgets under control.

Many shoppers are turning to generic or store labels as a way to offset the extra money they're spending on staples. And stores are helping by offering more private-label foods and products.

"More people are switching to generic from brand name," says Davis. "They are trading down."

But Lisa Lee Freeman, editor in chief of Consumer Reports' ShopSmart, says that in many cases, it isn't a trade-off. Shoppers often say they can't tell the difference between store and name brands.

Professional taste testers hired by the magazine have found store brands to be as good as or better than brand names for items ranging from canned peaches to french fries to paper towels.

Freeman suggests that people who swore off the generics of years past because they didn't like the taste or quality give them another try.

Members of USA TODAY's shoppers' panel have some suggestions for keeping costs down.

Janet Crowder of Hillsville, Va., says that in the face of higher grocery-store prices, she's shopping at local produce markets more often for lower-priced fruits, vegetables and eggs.

Marianne Dill of Naperville, Ill., says she's doing more home cooking, because some of the biggest price increases seem to be in processed foods.

Dill says that economic conditions and high food prices have combined to make her ask herself: Do I really need to buy that?

Kit Yarrow, a psychologist and professor who often shops with and interviews consumers, is frequently amazed that shoppers on tight budgets will splurge on name-brand snacks or character-themed foods.

She says studies show that those pricey purchases usually happen when Mom — and, even more so, Dad — brings kids to the grocery store.

But Yarrow, who teaches at Golden Gate University in San Francisco, says it's easy to see why shoppers make bad financial decisions. "It's almost impossible today not to feel overwhelmed when you're faced with budgeting as groceries become more expensive. There's less time to plan and cook. And you have a whole host of 'shoulds' rattling around in your head like, 'It should be healthy,' 'It should be home-cooked,' and, 'I should do it myself to save money.' "

Yarrow says many women put too much pressure on themselves to buy the right foods at the right prices. "They look back at their moms and, by comparison, it seems like they have a lot less control over things. The truth is that it's much, much harder to put dinner on the table today."