WASHINGTON - Americans are noticing higher prices at the grocery store, and it's about to get worse.
Food prices at the wholesale level rose last month by the most in 36 years. Cold weather accounted for most of it, forcing stores and restaurants to pay more for green peppers, lettuce and other vegetables, but meat and dairy prices surged, too.
The big questions are how long food prices will keep rising and how high they’ll go.
The effect is already visible. Wendy’s, paying higher prices for tomatoes, now puts them on hamburgers only by request. Starbucks and Dunkin’ Donuts have raised prices because they pay more for coffee beans. Supermarkets warn customers that produce may be limited or of low quality.
Food prices rose 3.9 percent last month, the most since November 1974. Most of the increase was because harsh winter freezes in Florida, Texas and other Southern states, which damaged crops.
At the same time, global prices for corn, wheat, soybeans, coffee and other commodities have risen sharply in the past year. That’s raised the price of animal feed, which has pushed up the cost of eggs, ground beef and milk.
Paul Ashworth, an economist at Capital Economics, says his firm has warned since last summer that spikes in commodity prices would eventually work their way down to wholesalers and consumers, “and here it is. There is plenty more to come over the next few months.”
Crop prices began to increase last summer, after droughts slammed harvests in Russia and several other countries. Sharp growth in new world economic powers like India and China has also increased demand.
Overall, the producer price index, which tracks price changes before they reach the consumer, rose 1.6 percent in February, the Labor Department said Wednesday. That’s double the rise from the previous month and the biggest increase since June 2009. The index is adjusted to account for seasonal variations.
The stock market dropped sharply on the disappointing U.S. economic reports and growing concerns about Japan’s nuclear crisis. The Dow Jones industrial average fell by more than 240 points, or 2 percent.
Hints of steeper food prices will likely show up in the government’s report on consumer prices, due out today.