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Originally published March 21, 2014 at 6:06 PM | Page modified March 22, 2014 at 8:25 AM

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Rude wake-up call for buyers as breakfast food gets pricier

Here’s a rundown of why breakfast food costs are rising, and why they could keep going up.


The Associated Press

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NEW YORK — Breakfast is now being served with a side of sticker shock.

The price of bacon is surging and the cost of other morning staples, like coffee and orange juice, is set to rise because of global-supply problems, from drought in Brazil to disease on U.S. pig farms.

And it’s not just the first meal of the day that’s being affected. The cost of meats, fish and eggs led the biggest increase in U.S. food prices in nearly 2½ years last month, according to government data. An index that tracks those foods rose 1.2 percent in February and has climbed 4 percent over the last 12 months.

While overall inflation remains low, the increases in food prices are forcing shoppers to search out deals and cut back.

Denise Gauthier, a screenwriter in North Hollywood, Calif., calls the rising prices “shocking and outrageous.” To cope, she has become more frugal, hunting for discounts and buying less food overall.

Even though food companies use a range of cost-cutting methods to limit the effect of higher food costs, consumers likely will feel the “ripple effects” of rising commodity prices, according to the Grocery Manufacturers Association.

Here’s a rundown of why breakfast-food costs are rising, and why they could keep going up.

Bacon

Bringing home the bacon is costing more. The price of lean pork in the futures market is at record levels and is up 52 percent since the start of the year, to $1.31 a pound. Traders are concerned about a deadly virus in the U.S. hog population. That could further boost bacon prices, which were already rising after farmers cut pig production because of higher feed costs. Those costs climbed after a drought in 2012.

The average price of a pound of sliced bacon in U.S. cities was $5.46 in February, up from $4.83 a year earlier and $3.62 five years ago, government data shows.

“You should expect to see very high prices for your ground beef, your other meat cuts, all the pork cuts will be higher this year,” Donnie Smith, CEO of Tyson Foods, said in an interview with CNBC on March 12.

Coffee

Coffee futures have surged 57 percent this year and this month rose above $2 a pound for the first time in two years. Coffee-growing regions of southern Brazil, the world’s largest coffee producer, have been hit by drought. Analysts are forecasting that Brazil’s crop could shrink by about 20 percent this year.

Shoppers should be prepared to pay more at grocery stores, if the current trend continues for more than a month, says Dan Cox, the president of Coffee Analysts, a company that tests coffee quality for retailers.

The average price of coffee for U.S. cities was $5 a pound in February, although that was little changed from a month earlier, according to government data.

The price impact will be less noticeable at coffee stores. That’s because the cost of beans makes up only a fraction of the final price, compared to other costs like rent and staff wages, says Alon Kazdan, 40, the owner of Cafe Noi, a small chain of coffee shops in New York.

Starbucks customers also shouldn’t worry. They won’t be paying higher prices even if the cost of the beans keeps going up, says CEO Howard Schultz. The Seattle-based company has locked in its coffee-bean prices for the next year using futures contracts.

While Schultz told reporters on Wednesday after the company’s annual shareholder meeting that coffee represented less than 20 percent of its costs and it could deal with current prices, the executive added that rising prices for dairy were more troublesome.

“I am concerned about dairy, both domestically and around the world, and we’re working feverishly” to help its purveyors and to identify new suppliers, he said. However, Schultz added that he wants to “resist raising prices in this environment.”

Orange Juice

Say squeeze when you pass the OJ. Orange juice futures are up 12 percent this year, and climbed as high as $1.57 a pound March 6, their highest price in two years. The price of a 12-ounce can of frozen orange juice edged up in February to $2.43 from $2.41 in January, according to government data.

Florida’s orange crop — one of the world’s biggest — is forecast to be the worst in almost a quarter of a century, due to a citrus disease and last year’s dry spell. The drought in Brazil also may cause orange-juice prices to rise.

Seattle Times business reporter Ángel Gonzáles contributed to this story.



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