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Food prices begin welcome descent

Consumers finally are seeing some relief after being knocked for a loop by soaring grocery prices last year.

The cost of a gallon of milk went down to $2.99, as of July, according to the latest figures available from the U.S. Bureau of Labor Statistics. That same gallon would have cost $3.68 last December.

A loaf of bread is $1.39, down from $1.42 in December. Eggs are $1.50, down from $1.83.

Those are the national averages. Some local prices are even better.

On Saturday, a gallon of milk was selling for $1.99 at Tops Friendly Markets on Grant Street in Buffalo. A carton of eggs was 88 cents at the Price Rite store on Kenmore Avenue.

The reason?

Shipping and ingredient costs, such as gasoline, wheat and corn, have begun their descent from record highs.

In addition, increased competition among food retailers for penny-pinching customers is nudging grocers to pass those savings along to strapped shoppers. That's translated to price cuts in dairy, meat, produce and baked goods.

The lower prices are a welcome reprieve for consumers who in the past year experienced a perfect storm of increased living costs, low incomes and the worst economic crisis since the Great Depression.

Mary Shine, of Buffalo, said the cartload of groceries she pushed through a Wegmans parking lot Friday cost about $20 less than she expected it would. It was a nice surprise.

"I figured once prices go up they seldom come down," she said.

A Labor Department price index of food sold to be eaten at home fell for the seventh time in eight months in July. The index, which is part of the Consumer Price Index, fell nearly one percent in the past 12 months.

Ingredient costs for major food makers, including Heinz, Kraft and Hormel, are down about 28 percent on average as of Sept. 1, from the same time last year, according to Jonathan Feeney, food analyst for Janney Montgomery Scott.

That means the food industry now has room to ease up on some of its earlier price hikes. It's good news to newly economical consumers who use more coupons, buy more store brands and have switched to discounters to stretch a budget.

"In this economy, every little bit helps," said James Harris, of Buffalo. "Prices seem a little bit better, but I'd love to see them come down some more."

Industry competition and consumers' demand to save money are pressuring retailers and manufacturers to cut everyday prices and boost promotions throughout their stores.

"More now than ever, consumers are looking for a great value," said Kate McKenna, Tops Markets spokeswoman. "They're making meals at home, eating out less and, in general, looking to spend less."

Tops has focused on BonusCard fuel deals and buy-one-get-one-free discounts. It also offers two tiers of private-label goods -- its own Tops brand and another line called Clear Valu. Tops operates 76 stores in New York and Pennsylvania.

"The price of goods is largely affected by transportation and commodity prices, which fluctuate regularly and are somewhat volatile," McKenna said.

Weather, demand, oil prices and marketplace competition all play a role in what customers pay, while each food category has its own economics of supply and demand. Falling prices for gasoline and transportation, plus consumer resistance to price increases, have helped drive the latest spiral downward.

Al Fanaro owns a Cheektowaga Jubilee Food Store and is president of the Jubilee Group, an advertising partnership made up of 16 independent grocers. He said distributors have begun decreasing fuel and delivery surcharges -- something that hadn't existed until fuel prices started their record increase. The added charges have padded retailer bills ever since.

"Fuel surcharges and delivery fees were raised quite a bit when gas prices got high," he said. "They haven't totally been eliminated, but they're decreasing."

Anticipating that prices would soon go down, Wegmans took a proactive approach, lowering prices on hundreds of staple items in November.

The 73-store company said that strategy has paid off, bringing in new customers and building good will among existing ones.

"A lot of customers discovered things they might not have realized otherwise, said Ann McCarthy, Wegmans spokeswoman. "Was it good for our customers? Sure. Was it good for business? Yes."

Wegmans' prices continue to fall, with the store continually adding more items to its roster of "everyday low prices." It claims to have saved consumers $16 million in pharmacy costs due to its reduced pricing and free antibiotics program and trimmed another $12 million on everyday items.

Still, lower prices at most grocery chains have yet to make up for the surge in food prices from last year, when some manufacturers shrank package sizes to protect profit. The one percent drop in prices so far this year doesn't make up for last year's 6.7 percent increase on the Consumer Price Index's food-at-home index.

"Our company and many of those we buy from were locked into contracts for fuel and commodities, and there is no magic date when everything will return to normal," said McCarthy.

The Associated Press contributed to this story.

e-mail: schristmann@buffnews.com

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