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How Rising Grocery Prices Change What We Eat

March 31, 2014 at 10:02 AM ET

Image: Alice Korey, left, mother of three, unpacks grocery bags from Kroger and uses coupon apps on her iPhone to cut costs of rising food prices at grocery stores
Erin Trieb / for NBC News
Alice Korey, left, mother of three, unpacks grocery bags from Kroger at her home in Katy, Texas, on March 27. She uses coupon apps on her iPhone to combat rising food prices. "The bill would have been $200 if I hadn't used coupons, but now it's around $100. We use that extra money for the kids' extracurricular activities and college savings."

Don’t be surprised if you see fewer steaks on the backyard barbecue this summer.

Economists are expecting grocery prices to rise modestly in 2014, following a year in which grocery bills barely budged. That could lead to sticker shock – especially in the meat aisle, where beef prices have reached record highs – and cause shoppers to trade out pricier foods for other, less expensive ones.

Economists are already starting to see signs of those tradeoffs, especially when it comes to red meat.

“It does seem like consumers are making the choice to get the ground turkey instead of ground beef, or the filet of salmon instead of the filet of beef,” said Richard Volpe, a research economist with the U.S. Department of Agriculture.

That’s exactly what Alice Korey started doing recently, when she realized that her favorite, high-end beef was getting too pricey and another favorite protein, buffalo, was also too expensive at her local grocery story.

“Now what I’m doing is buying turkey, because turkey is cheaper than beef,” said Korey, a stay-at-home mom with three kids who lives in Katy, Texas.

Korey said steaks also will be a treat this summer, because of higher prices. In general, she said she’s taken to using coupons, looking for sales and finding little ways to cut back on the family grocery bill.

Rising food prices mean changes for summer barbecues

The Department of Agriculture predicts that the overall prices for food we eat at home will rise by between 2.5 percent and 3.5 percent this year. That compares to a less than 1 percent increase in 2013 and a 2.5 percent increase in 2012.

Already, shoppers are probably seeing some of those price increases, particularly when it comes to their favorite proteins. The price of beef and veal was up 5.4 percent in February, compared to a year earlier, and fish and seafood prices rose by 7.2 percent year over year, according to the USDA. Egg prices also were up sharply, the USDA reported.

The price of beef is up following droughts that have hurt ranchers, leading to less beef supply. That, in turn, appears to be one factor in causing prices for other proteins to go up, increasing grocery bills.

Economists say that when beef prices rise, it tends to have a more immediate impact on a person's grocery bill because it's basically a single-ingredient product. By contrast, when a bad crop year leads to increase in the price of a commodity like wheat, it may not immediately lead to such a big spike in the price of your cereal or bread, because so many other things go into making those foods.

Consumers don’t necessarily give up on a favorite food completely when prices go up, said Ryland Maltsbarger, an economist with IHS Agriculture. Instead, he said, some shoppers who really want a steak might first look to see if there is a cheaper steak available.

If that’s still too pricey, a beef lover might start making other tradeoffs, like serving hamburgers twice in one week instead of steak one night and hamburgers another, or buying smaller steaks.

“Now what I’m doing is buying turkey, because turkey is cheaper than beef.”

When food prices go up, low-income households are hit hardest because they’re forced to spend more of their disposable income on food. But economists say most families, even those with more financial flexibility, often make tradeoffs to keep their grocery bill from getting out of hand, or to counterbalance higher prices for things like gas or medical expenses.

Korey, 42, said she and her husband, a salesman in the oil and gas industry, want to provide what they consider a normal family life for their kids. That means buying decent clothes and shoes and being able to fund reasonable activities, like recreational baseball or a band trip.

But those things add up, and Korey said she realized that if she wanted to keep the family budget intact – and continue to put aside a bit for her kids’ college funds – she needed to start paying closer attention to rising food prices.

“When you want to be able to provide those things for your kids, it’s like, “Why do I want to pay $7 for orange juice?” she said.

Even at high-end grocers like Whole Foods, customers seem to be mindful of price shifts. The company told NBC News in an e-mail that customers shopping for proteins have lately been gravitating toward ground beef, chicken and lunch meats.

Michele Murray, senior executive director for integrated communications with the National Cattlemen’s Beef Association, said it’s hard to predict when more beef will be available.

In response to higher prices, Murray said the trade group is seeing consumers buy more beef in bulk, choose more modestly priced ground beef and decrease portion sizes.

The amount of beef people are eating has decreased because there is less beef available, she said, but the trade group does not think interest in eating beef has waned.

Economists are predicting that prices for other food items will increase modestly this year as well. But so far at least they aren’t expecting an extremely dry winter in California to lead to vastly higher prices for fruits and vegetables, which are more easily obtained from overseas than items such as beef. That should be good news for produce lovers on a budget.

“We’ll see some impacts from the California drought, but it will probably be on specific items, and it will be mitigated by imports,” Maltsbarger said.

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