7 News Special Report: “Why Do Things Cost So Much?”

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From chicken and beef to fruits and vegetables, just about everything we buy at the grocery store is costing us more.

Many people who never worried about paying for food are finding their budgets squeezed.

“My gosh, I have to be so careful about what I get,” said frustrated shopper Sally Donroes.

In just the past year, food prices have gone up five percent according to the Consumer Price Index.

Big M owner Bill Bonisteel says he can’t help but raise prices at his grocery store.

“I’m in the middle, so if I have increases from my vendors, I have to pass them along,” he said.

That’s not all.

Like many businesses, he’s paying more for energy and labor.

But he’s trying to adjust.

“What it makes us do, the retailer, is order better, think about the month’s worth of ordering and not just order as we need it,” said Bonisteel.

On the farm, adjusting to rising prices is more difficult.

“I’ve been farming 30 plus years and this is probably the most challenging year we’ve ever experienced,” said Ron Robbins.

The dairy farmer says he can’t keep up with the swings in milk prices.

Cost estimates made in January were worthless by April - skyrocketing by 20 percent thanks in large part to gas prices.

“It’s a cost that you can only manage so much. We just have to use it and it’s really putting a pinch on us,” said Robbins.

Gas prices aren’t the only reason things cost more.

There are other major factors, including inflation.

Here’s an example, a decade ago we paid $2.85 for a gallon of milk.

Today we’re paying $4.16 - about a dollar of that increase is inflation.

Then there’s the weather like last month’s flooding in the midwest which isn’t helping food prices.

And some argue that demand for bio-fuels has farmers switching away from food production.

Another factor has to do with the global economy.

“The growth of China and India has been a huge factor here. We’re seeing people not just increase the population, but more importantly increase the wealth there, where people can afford to buy more food,” said St. Lawrence University Economics Professor Steven Horwitz.

So how can we bring food prices down?

Professor Horwitz says lower gas prices is the quick fix.

Looking at the supply side, like allowing more food in from foreign countries, is the long term solution, he said.

Resources:

You can see 7 News Reporter Andrea Friedman’s special series “Why Do Things Cost So Much?” 6 and 11 on Tuesday, Wednesday and Thursday.

See Part 1 of Andrea’s series:

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Comments

2 Responses to “7 News Special Report: “Why Do Things Cost So Much?””

Mandy T on July 17th, 2008 6:01 pm

There are several ways to cut food costs. A great place to check out is http://www.thegrocerygame.com There are several ways to assist everyone on any budget especially with the rising cost of food and other household items.

http://www.wmdt.com/topstory/topstory.asp?id=2546 is just one example of Terri Gault and the grocery game on the news.
Janet on July 23rd, 2008 6:20 pm

Great story! I am a big fan of Retail Me Not.com, I also like http://www.rather-be-shopping.com for online coupons and some other more unconventional ways to save money. The blog is a nice read.