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Steve Tarpin can bake a graham cracker crust in his sleep, but explaining why the price for his Key lime pies went from $20 to $25 required mastering a thornier topic: global economics.
He recently wrote a letter to his customers and posted it near the cash register listing the factors: dairy prices driven higher by conglomerates buying up milk supplies, heat waves in Europe and California, demand from emerging markets and the weak dollar.
The owner of Steve's Authentic Key Lime Pies in Brooklyn said he didn't want customers thinking he was "jacking up prices because I have a unique product."
"I have to justify it," he said.
Americans are wrestling with the worst food inflation in 17 years, and inflation data released this week show the problem is getting worse: The Labor Department said inflation at the wholesale level soared in March at nearly triple the rate that had been expected as the costs of energy and food both climbed rapidly.
Rising food costs are putting the squeeze on poor families and forcing bakeries, bagel shops and delis to explain price increases to their customers.
U.S. food prices rose 4% in 2007, compared with an average 2.5% annual rise for the last 15 years, according to the Department of Agriculture. And the agency says 2008 could be worse, with a rise of as much as 4.5%.
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"I was talking to people who make $9 an hour, talking about how they might save $5 a week," said Kathleen DiChiara, president and chief executive of the Community FoodBank of New Jersey. "They really felt they couldn't. That was before. Now, they have to."
For some, that means adding an extra cup of water to their soup or watering down their milk, DiChiara said.
U.S. households still spend a smaller chunk of their expenses for foods than in any other country -- 7.2% in 2006, according to the USDA. By contrast, the figure was 22% in Poland and more than 40% in Egypt and Vietnam.
In Bangladesh, economists estimate 30 million of the country's 150 million people could be going hungry. Haiti's prime minister was recently ousted following food riots there.
Still, the higher U.S. prices seem eye-popping after years of low inflation. Eggs cost 25% more in February than they did a year ago, according to the USDA. Milk and other dairy products have jumped 13%, chicken and other poultry nearly 7%.
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The reel inflation indicatorSoaring prices for corn, sugar and other foods are making it more expensive for Americans to enjoy a night out at the cinema, restaurants or the ballpark, says CNBC's Julia Boorstin.
The other reasons are more complex. Rapid economic growth in China and India has increased demand for meat there, and exports of U.S. products, such as corn, have set records as the weak dollar has made them cheaper. That's lowered the supply of corn available for sale in the United States, raising prices here. Ethanol production has also diverted corn from dinner tables and into fuel tanks.
Soybean prices have gone up as farmers switched more of their acreage to corn. Drought in Australia has even affected the price of bread, as it led to tighter global wheat supplies.
Eat the costs, or not?
The jump has left people in the food business to do their own explaining.Twin Cafe Caterers in lower Manhattan posted a letter on its deli cooler: "Due to the huge increase of the gas, the electricity, the water and all the other utilities, we had to raise the prices a little bit." It went on to say that all its food prices have risen, too.
Wonder Bagels, in Jersey City, N.J., posted a letter from its wheat supplier, A. Oliveri & Sons, saying the recent situation was unprecedented.
"The major mills across the country are using words like 'rationing' and 'shortages' if things continue," it said. "We will sweat out the summer together, hoping there will be some flour left to purchase at any price."
The letter called for an immediate halt to exports and a change in farm policy, "stop paying farmers NOT to grow crops." A new farm bill, stalled in Congress, would expand farm subsidies if it passes, however.
For some Americans, the resulting increases might be barely perceptible. The Cheesecake Factory raised prices by 1.5% at the end of February, Applebee's by 3%.
But for the poorest U.S. families, the higher costs may mean going hungry. A family of four is eligible for a maximum $542 a month in food stamps, which never lasted the whole month before, the FoodBank of New Jersey's DiChiara said.
"Now food stamps go fewer and fewer days of the month," she said.
The food bank recently got a letter of its own from a key vendor. Its grim message: Sorry, but the prices they charge the food bank would be increasing 20%, due to food inflation.
This article was reported and written by Ellen Simon for The Associated Press.
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