The October USDA report says that the prices of grains have risen sharply recently, and that's bad news for all of us consumer who eat food (presumably that includes you!). Because much of the meat industry uses grain as feed, this price increase will likely cause meat prices to increase along with the price of cereal and other grain-based foods.
This news may not be as bad as you might expect, though, because the cost of raw ingredients is just one in a multitude of others, as a recent NPR report points out. In fact, that very article points out that the most expensive part of cereal production is the gasoline required to deliver it. And that's why a spike in gas prices is going to cause a prompt increase in grocery prices, whereas a spike in grain prices may or may not make your cereal cost more.
That seems very backwards and is somewhat disturbing to me, by the way...that the raw material for a food product is one of the smallest expenses. I'd really prefer for more of my food dollar to go towards, you know, food, instead of towards packaging, marketing, and delivery.
But, I digress.
What will happen if food prices do increase at a rate that mirrors the price of grains?
I can't tell you that exactly, but I can tell you what I won't be doing: freaking out. And you probably don't need to freak out either.
Because for most of us, 3% just doesn't amount to a huge pile of money.
Want some numbers?
I generally spend $100/week to feed my family of 6, and I do this by buying mostly ingredient-type foods instead of convenience foods. If grocery prices rise 3%, I'll be paying $3 more per week, or $156 more than usual over the course of a year.
A household that spends $200 a week will be paying $312 more per year, and the household that spends $300 a week will spend an extra $468 per year.
$468 sounds like something to freak out about, but really, it's only $9 a week.
Now, if your budget is tight enough to make a $9/week increase a notable event, you probably aren't spending $300/week on food in the first place. You're probably at or below the $100/week spending mark, and that means that your spending is only going to go up by a few dollars each week.
So, yeah...I'm not thinking this is a huge deal.
If your brain is stubbornly persisting in freak-out mode, though, or if you'll just feel better if you can do something about this, here are a few suggestions.
1. Buy ingredients instead of ready-to-eat foods.
If you buy foods that are closer to the ingredient end of the continuum than the finished-product end, your food costs and price increases aren't going to be so scary.
For instance, the price of a pound of oatmeal is around $0.99 and the price per pound of ready-to-eat cereal is more like $3-4. If the price of grain did something as awful as doubling, the oatmeal would only increase by $1, but the ready-to-eat cereal would increase by $3.
Not only are ingredient-type foods less expensive (mostly because they have less packaging and a smaller marketing budget), they also tend to be healthier. So, basically they're a win-win-win-win. Or something like that.
2. Drink water.
The tap variety, preferably. It's nigh onto free, and it's not going to be subject to the 3% price hike, unlike bottled water (which is sometimes just insanely expensive tap water!).
If your tap water tastes weird, buy a water pitcher filter. If you need to take water with you, buy a stainless steel canteen and fill it up before you leave home.
Considering that the average American drinks 50 gallons of sweetened beverages in a year, this change alone could save you a respectable amount of money (at $3/gallon, 50 gallons will cost you $150 annually).
3. Look at cutting other areas in your budget.
If you're one of those $300/week households that will spend $9 more per week after prices rise, and you feel like you absolutely can't manage to cut your grocery spending back, look at other expenses in your budget. Maybe you could skip a monthly movie theater trip -- do Netflix and popcorn at home. Maybe you could get by with fewer clothes or shoes. Maybe you could switch to a cheaper cell phone plan -- I use a pre-paid phone that resembles a brick.
4. Eat at home.
This one falls under the previous heading, but I felt it deserved its own number.
If a 3% grocery bill increase is making you feel uneasy, take a serious look at how much it costs to eat out. For my family of six, a takeout meal can easily cost $20-$30 and a sit down meal runs us $60-$80. In contrast, I can buy a week's worth of groceries for $100, which means that our average at-home meal costs us only $5.
$5! Eating at home is such a bargain. Even if you spend twice as much as I do, the at-home meal is only going to cost $10, and that's still a fabulous bargain.
So, what do you think? Are you feeling worried about the looming 3% increase, and will you be making any financial changes as a result of it?
Kristen writes about cheerfully living on less at The Frugal Girl. She's a photography and baking nut, and a happy wife (of one) and mom (of four).
More from living