Food Prices are on the Rise, Here’s How to Fight Back

Families battling to make ends meet in a weak job market and frail economy will continue to fight high food prices throughout the year thanks to rising wheat, corn and milk prices.

Food prices are expected to increase between 2.5%-3.4% this year, according to the U.S. Department of Agriculture, and that’s on top of the 3.7% increase that hit cash-strapped families in 2011.

"Wheat and milk are both imbedded in most foods, so if prices for those commodities go up, then those costs will get passed onto the consumer," says Ed Butowsky, wealth manager at Chapwood Investments. "Whether you shop at the grocery store or you only eat out in restaurants, you're going to see the increase. It may only be 5 cents here or 10 cents there, but it adds up."

The high demand for corn, wheat, and dairy combined with sluggish supply due to bad weather conditions earlier this year has created the perfect storm for higher prices, he says. Unfortunately, prices may rise more than projected, increasing by 6%-10% later this year.

"It depends how much corn, how much wheat, how much dairy is available in the world. It comes from everywhere, and it's being sold everywhere, so these days you have to look at overall worldwide demand and there's 7 billion people to feed," he says.

Unfortunately, many shoppers have already experienced increased prices at the grocery store, says Stephanie Nelson, founder of CouponMom.com.

"The manufacturers have figured out some clever ways to increase their revenue without shocking consumers," says Nelson. "In the last year I've seen packaging getting smaller and manufacturers demanding that consumers buy greater quantities in order to receive a break in price."

According to Nelson, many brand-name yogurts used to come in eight-ounce packages, now most of the containers contain six ounces, with some dropping to five ounces.

"Five ounces? I'd have to eat three of those!" she says.

Cereal boxes are also shrinking, she says. Two years ago most brand-name boxed cereals came in 16-ounce boxes, now many are only 14 ounces. Of course the price for these items hasn't changed.

"The quantities have gone down, but the prices have remained flat or increased," says Nelson.

The couponing world has also tightened up, she adds. She suggests bargain hunters pay close attention to coupons’ fine prints. Many manufacturers still offer two-for-one specials or half-off deals, but in order to activate the savings, consumers must purchase 10 participating items.

"They're still letting you have items at the sale price, but now you have to spend more to get it.”

Here are three tips from Nelson to combat rising food prices:

1.) Know the prices of the items you frequently buy. For example, if you know your favorite brand of cereal is usually $3 a box and you see it at your local market for $5, you know that's out of line, she says. "Don't be afraid to look at alternative retail options like no frills discount stores or Wal-Mart. You can still beat the rising costs by being strategic."

2.) Be flexible on brands. If you notice that your favorite brand has increased its prices, don't be afraid to test out the competition. "You may find another brand you like even more. Don't get too attached to names."

3.) Understand and take advantage of promotions. "You can still manage to pay what you paid a year ago if you take the time to understand how your store's promotions work," she says. "Don't be afraid to ask questions or shop on certain days of the week if you stand to save more money."