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Consumer Groups Ask Grocers to Hold Price Line in Face of Drought

August 04, 1988|DANIEL P. PUZO | Times Staff Writer

Segments of the food industry are using the current drought as an excuse to unnecessarily raise food prices, according to two of the nation's leading consumer advocacy groups.

The claim is also being made by some trade organizations, such as beef producers, who state red meat prices should actually decline because of the hot weather.

As part of their drought-awareness campaign, Public Voice for Food and Health Policy and the Consumer Federation of America recently contacted 70 of the nation's largest supermarket companies and urged the retailers to restrain price hikes, particularly on store brands and dietary staples.

The appeal to grocers is made, in part, because low-income households are particularly sensitive to any such increase, the two Washington-based consumer advocacy groups said in a letter mailed to supermarket executives.

Retail food prices are expected to rise between 6% and 7% because of the lack of rain throughout most of the Midwest, according to federal statistics. Before this summer's dry, hot weather, however, the projection was for a 3% jump in food costs.

Even so, any such predictions are day-to-day because there's still time for rain to salvage significant portions of those crops hardest hit by the drought such as corn, soybeans, oats and wheat.

"No one knows the extent of the damage," said Ellen Haas, Public Voice executive director. "But if there is a price increase now, then that is premature. . . . We're not assuming that there is price gouging going on, but this (appeal) is a dose of preventive medicine."

The concern about prices, Haas says, is centered on processed foods because much of what is currently on store shelves was produced before the drought.

"If manufacturers (or wholesalers) increase the price of items such as corn flakes or pasta, then retailers should question (or resist the change)," she said. "Pasta, for instance, is made with winter wheat and that had been harvested before the weather problems. And corn flakes have been in the box several months and there is also a reserve in corn."

Haas conceded, however, that if current conditions persist, then consumers will experience higher food prices, particularly within a year's time.

"The (food commodity) future's market is volatile and there's no doubt that the cost of food will be at its highest level in eight or nine years," she said.

Beef's a Bargain--Although the cost of meat is also likely to rise in the coming months, beef and pork prices are now at their seasonal average, or even lower. The decreases are the result of many livestock producers liquidating their herds rather than pay higher prices for grain-based feeds. Parched grasslands are yet another reason for cattlemen to thin out the number of animals being raised on drought-impacted pastures.

In fact, the Beef Industry Council, a meat-industry group, recently ran a full-page advertisement warning retailers about getting a "bum steer on beef prices."

The ad, which appeared in a trade publication, went on to state that "the drought is not increasing beef prices. Beef prices are actually down in recent weeks--because supplies . . . are up."

This development was echoed by the Western States Meat Assn.

"(The drought) has brought larger beef and pork supplies and lower wholesale prices," according to a recent newsletter published by the Oakland-based organization.

Produce Is Threatened--California growers, though not as vulnerable to the drought as their Midwestern counterparts, have been hurt by the heat wave of recent weeks.

Problems are beginning to surface on a number of commodities, thus raising the possibility that fruit and vegetable prices may be on the upswing, according to a bulletin by the Fresh Produce Council in Los Angeles.

Most vulnerable, at present, are such items as radishes, spinach, some lettuce varieties, broccoli, cauliflower, fresh corn and bell peppers.

"The reduced yields and quality problems should start to be reflected in the retail price of a number of items," the council reported. "In July, the weather problems really (were) not noticeable on the supermarket shelf, but experts say this will not be the case in August, if the weather continues to remain hot."

Broccoli and cauliflower are the two commodities projected to increase dramatically if the heat wave continues. And the state's production of corn-on-the-cob is also strained because of shortages elsewhere in the country.

Fresh corn is traditionally grown throughout the nation during the summer and supplies are abundant. This year, however, the drought has reduced regional production, particularly in the Midwest.

"The price of sweet corn has increased. . . . A lot of (the) local production is being wiped out and retailers throughout the country are relying on commercial production from the West Coast," the council reports.

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