NEW YORK (AP) — 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 2 ½ 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, 54, 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.
"I
will look for things that are on sale and adjust my menu for that," says
Gauthier, who now stocks up on her favorite coffee when it goes on sale
for $4.99.
Even though food companies use a range of cost-cutting
methods to limit the effect of higher food costs, consumers will likely
feel the "ripple effects" of rising commodity prices, according to the
Grocery Manufacturers Association, a trade organization for more than
300 food, beverage and consumer product companies.
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 cost
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.
The retail price of pork is projected to climb by 2.5 percent to 3 percent this year, according to
government forecasts.
"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.
U.S.
pig herds have been hit by a virus called porcine epidemic diarrhea, or
PED, which causes vomiting and diarrhea in the animals. After the first
case in the U.S. was confirmed in May, the virus spread through hog
herds during the cold winter. While the disease doesn’t affect people
and is not a food safety concern, it can lead to mortality rates of
between 80 and 100 percent in newborn piglets. That’s raising concerns
of thinner herds as the U.S. heads toward the summer grilling season,
when demand typically picks up.
Traders don’t know exactly how
badly the virus will impact pork production because it’s the first time
that PED has been detected in U.S. herds, says Dennis Smith, a commodity
broker at Chicago-based Archer Financial Services.
"It’s become a hysterical market," Smith says.
Gus
Kasimis, 60, manager of the Green Kitchen Restaurant, a New York diner,
says that increases in food prices had already become more frequent and
that he had been forced to pass on the higher costs to customers.
But
he’s not worried that people will stop coming. Instead, they will cut
down in other areas, perhaps spending less at more expensive
restaurants, if they feel the squeeze.
"They still need to get a decent breakfast," he says.
COFFEE
You need your morning brew, and you’ll likely pay more for it, at least at the supermarket.
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.
"Whether it’s by the can or
the bag, consumers should probably expect to pay 50 cents per pound
more, fairly soon," Cox says. 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.
Caroline
Krajewski, a spokeswoman for Kraft, which owns the Maxwell House coffee
brand, declined to comment on the company’s pricing plans.
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.
Espressos
at the cafe cost $2.40; Americanos are $3; lattes go for $3.60.
He
says prices should also remain in check because of competition between
the companies that roast the beans into the coffee. As for rising
commodity prices, he puts that down to speculation.
"People like to make panic for nothing, in order to make money," he says.
Of
course, people who need to get their caffeine fix won’t be put off.
Plus, coffee prices were at their lowest level in about seven years
before they started climbing.
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 company has locked in its
coffee bean prices for the next year using futures contracts.
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.
To be sure,
moves in retail food prices won’t match the wild jumps in commodities
markets, says David Garfield, a consultant at AlixPartners who advises
food-makers. The reason: food companies worry about losing market share
and will absorb some of the higher costs rather than risk losing
customers.
"People would be up in arms, if every time they went to
the grocery store the prices of their preferred items were jumping up
and down," says Garfield.
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.
A series of problems are driving the
increases. Florida’s orange crop is forecast to be the worst in almost a
quarter of a century. A citrus greening disease, which is transmitted
by tiny insects that feed on the leaves of oranges, is damaging the
harvest. Infected trees start to produce bitter green fruit. The problem
was first detected in the U.S. in September 2005 and the Florida orange
juice crop is down by almost a quarter since then.
No cure is known, and the only solution is to cut down the tree.
Add
weather to the orange juice problem. A dry spell last year stunted the
growth of orange trees in Florida and is hurting production this year,
says Michael Smith, president of T&K Futures and Options, based in
Port St. Lucie, Florida. In South America, drought is raising concerns
about the size of the crop in Brazil.
"There’s a confluence of
events … but the citrus greening has probably been the worst problem
we’ve seen over the last few years," Smith says.
The orange crop
in Florida, one of the world’s biggest orange-growing regions, could
fall this year by about 15 percent to 114 million boxes, according to
government forecasts. That would be the smallest crop since 1990.
Beverly
Bolin, 76, who is retired and lives in Van Nuys, Calif., says she is
buying more of the generic store brand products and less tea and coffee.
In addition, she only buys orange juice if it’s on sale, as long as
it’s not from concentrate.
"I try to budget, but it’s always over budget," she says. "I’m really feeling it."

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Business Writer Alex Veiga in Los Angeles contributed to this report.
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