Food makers pass on savings to customers

After tracing an upward path last year, thanks, in part, to increased fuel prices and global demand, food prices recently have declined.

The Wisconsin Farm Bureau Federation keeps tabs on food prices with a quarterly survey of retail prices.

The report indicates prices dropped about 3.4 percent in the first quarter of 2009, compared to the end of 2008.

The average cost of 20 basic food items totaled $55.85 in the first quarter of 2009, a $2.06 decrease from the survey's average price of $57.91 at the end of last year.

"When we had gas prices and diesel prices going through the roof, that really hit the transportation costs of getting the products to market,"said a spokesman with the Wisconsin Farm Bureau Federation. "We saw retail food prices take a while to react, but when they did, they did in a hurry. … And a lot of that was due to energy prices."

He said farmers get about 19 percent of each dollar spent on food. Additionally, many of the large food companies will forward-contract for farm products, which creates a lag time in retail prices — up or down — as the commodity markets change.

Retailers, who begrudgingly went along when food makers pushed up prices to recoup record-high costs, are flexing newfound muscle and demanding price cuts to match the recent steep retreat in ingredient costs.

Food makers are resisting, saying the uncertain economy and volatile costs make price cuts unwise. But retailers aren't backing down.